Summer Blues

Energy: Crude oil has held onto the $78 level for four days now as a base may be building. I like wading into longs in a small way willing to cut loses on a breach of $78 on a closing basis in the front month. As I said yesterday an interim bottom is not confirmed until we trade back over $85/barrel. RBOB gained for the third session running closing just under the 8 day MA which serves as major pivot point in my opinion. A trade above that level should get enough momentum to lift RBOB back near $2.65 in the front month. Heating oil gained 1.5% today gaining for the first time in five sessions. Like RBOB a trade above the 8 day MA just above today’s highs would lead to a further upside in my opinion. August should find its way to $2.70/gallon. Natural gas was higher by 3% to lift prices to 5 week highs. I still am in the camp that we see a move south before a $3 trade. I am confident the lows are in but maybe a 7-10% correction is what I’m thinking.
Stock Indices: With a slight gain today prices in US markets ended back above their 50 day MAs. Prices may be able to pare losses but until they are back above their 9 and 20 day MAs which come in around the same level I would be in sell rally mode. Those levels in the Dow are 12600 and in the S&P at 1330 in September futures.
Metals: Gold failed to make it to higher ground today losing 1% and giving back most of the previous day’s gains. I remain in the camp that prices are due for a test of the lows seen in May…trade accordingly. Silver should chop between $27-29 ounce until at least next week. Forced into the market I would prefer to be a seller from higher ground but for now I’m suggesting the sidelines. A trade under $26.50 in my opinion would lead to a trade near $24/ounce.
Softs: Cocoa gained today for only the second day in the last 9 sessions. If the dollar backs off it may warrant taking a look at buying but I’d like to see further evidence. For the last 3 months 2100 has served as a value zone but will this time be different? Sugar is finding support around the 20 cent level but I’m still a spectator…stay tuned. As long as December cotton remains above 66 cents my target of 77 cents stands. I issued a buy recommendation in coffee last week and since then prices have appreciated 10%. This to me is the beginning of a larger leg that should lift prices above the 50 day MA and find its way to the 100 day MA…still 11.5% higher.
Treasuries: 30-yr bonds and 10-yr notes remain range bound though prices are under their 9 and 20 day MAs as of today’s’ settlement. My suggestion remains put options looking for a bigger move in the coming months or scaling into futures with stops just above those key pivot points.
Livestock: October live cattle were lower today and are now within spitting distance of new contract lows which I expect around the bend. Looking longer term at the weekly chart a 38.2% Fib retracement would drag prices still another 4% so I do not think the bears are done. Feeder cattle lost 1% today to trade at their lowest level in2012. Still there should be more to come as the next stiff support is 2% below current levels. Lower trade is expected in lean hogs as well as the May lows should be challenged in the coming sessions.
Grains: Inclement weather has grains on fire with corn higher by 5% today lifting prices to 10 month highs. We’ve completed a 61.8% retracement and at this point I would not rule out a trade to last summer’s highs. Buy dips remains the play in maize. Soybeans failed to follow through and in a perfect world prices retrace allowing a buying opportunity to get long from lower levels ahead of the USDA report out Friday. Wheat did gain on the day but the pace of buying is slowing with prices only higher by 1% today. I am not opposed to bullish trade but there is 30 cents of risk in the futures in my eyes in the December contract so trade accordingly.
Currencies: For the second day prices in the dollar index failed to take out the 20 day MA…could this be the line in the sand? I still think the Aussie could falter but those in profits trail stops in case I am wrong you can book a smaller profit. The Yen will continue to exhibit an inverse relationship to the stock market. A trade back above the 20 day MA just above today’s highs likely means stocks are headed south. I’m getting mixed signals in other crosses so let the dust settle.
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