Bernanke Continues Kicking the Can

Energy: August Crude oil is within 1% of $90/barrel, a level not seen since the last week in May. As long as the buck continues lower and equities continue to gather steam I see the path of least resistance upward. The 8 day MA serves as support and if prices penetrate $90 expect $94 to follow. RBOB was a marginal loser today for the first time in the last five sessions. As long as the 8 day MA supports at $2.79 we should see a challenge of the 100 day MA about 7 cents above the current price. I am friendly but would be trailing stops. Heating oil continued its streak closing higher for the last five sessions. On further upside look for the next resistance at $2.92 in August. Natural gas lost ground for the last three sessions. Today prices probed the 18 day MA again but closed just above that pivot point. I expect lower trade with a target of $2.45-2.55 in August futures.
Stock Indices: Stocks gained shy of 1% but appear to be supported by The Fed’s testimony ahead of Congress today. With today’s action lifting prices back over their short term MAs expect a grind higher. I have NO conviction either way and prefer clearer signals to issue a buy or sell recommendation. A settlement above 1370 in the S&P and 1290 in the Dow would likely mean higher trade.
Metals: Indecisiveness in the gold market caused a $28 trading range resulting in a 0.60% loss dragging prices under the 50 day MA. Prices could go $30 in either direction so I would back off trying to outguess this market. My bias is bearish but can we really see a significant break with a weakening dollar? Silver experienced a wild trading range high to low of nearly 90 cents but prices closed virtually unchanged. My best guess is further downside is merited and would be willing to commit if prices breakdown to confirm.
Softs: With cocoa completing a 61.8% Fib retracement my advice remains the same trail stops on short plays just above the 50 day MA; in September at 2225.Sugar continues to tread water. In October a close below 22.25 would signal an interim top. A false break out in cotton as prices lost 3% today to settle near their lows and back under the 50 day MA. Traders can scale into shorts with stops above the recent highs. For the last two sessions OJ has had trouble breaking the 50 day MA but I view that as temporary and see further depreciation. Use $1.10 as your target in September futures. Coffee closed down 1.15% and appears to be on the verge of breaking its 100 day MA. On that expect a further 10 cent loss. I like bearish plays in options trying to capitalize on lower pricing to come.
Treasuries: Today’s chart of the day was 30-yr bonds as this week may prove to be an interim top…stay tuned. It will take a close under eth 9 day MA at 150’26 and then the 20 day MA at 149’24 to confirm. 10-yr notes lost about half as much as 30-yr bonds did but prices did challenge their 9 day MA. I see the probability of lower trade in both instruments but would wait for confirmation. As opposed to an outright short play my suggestion is incorporate a combination of options and futures or a NOB spread; short 30-yr bonds and long 10-yr notes.
Livestock: Live cattle lost 1.1% to drag prices back near three week lows. Further downside is expected and if bears gather momentum and break the April lows $1.12 could be in the cards in my opinion. Feeder cattle are on the verge of breaking ten month lows as prices are down 3.45% just this week. There are gaps being formed on the way down that eventually should get filled but I do not expect the bottom is in yet. Lean hogs have been in the red five out of the last six sessions and in my opinion on their way to a sub 89.00 cent trade in August. Remain in bearish trades for now.
Grains: Corn traded slightly lower giving back early gains but what is the most significant action is the choppiness that generally precedes market turning points. I do not think the summer high is in but before it is a 60-80 cent correction will play out in my opinion. November soybeans closed unchanged a dime under $16/bushel. If and when a correction occurs here I think it could be more dramatic as prices could drop $1-1.50 in my opinion. Wheat lost 0.80% closing back under $9/bushel. I do not like picking tops as it is almost always a losing battle but assuming we are close to an interim top December wheat could find its way back to the low $8’s in December.
Currencies: Day three of a dollar decline as prices are set to challenge the 20 day MA this week on a 25 pip drop from current pricing. If that level is broken my first target is 82.00. It is not that I think there is huge upside in the European currencies but why I like scaling into longs is that one could put stops below the recent lows and have the lowest risk in dollar terms. The commodity currencies have already made a move and stand at overbought levels.
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