Energy: Crude oil closed slightly lower unable to hold onto its gains. After a $10 run in less than one week it makes sense for prices to catch their breath. I see support in August around $84/85 with resistance at $90. At this point I would not rule out a $5 range between support and resistance. RBOB completed a 38.2% Fibonacci retracement closing above the 50 day MA for the first time since early April. As long as the trend line that was breached this week holds I remain friendly with an upside target of $2.85 in August. Heating oil closed slightly lower just above $2.75/gallon. Support is seen at $2.67 with resistance at the 50 day MA at $2.81 then 10 cents higher. Natural gas continues to climb higher gaining 1.9% today closing at fresh highs. Prices may probe $3 being we’re so close but I still feel a 10% correction is due…trade accordingly.
Stock Indices: After completing a 61.8% Fib retracement earlier in the week stock indices have had trouble reaching higher ground. Prices could go either way likely being determined by tomorrow’s jobs number. I see the Dow moving 200 points tomorrow and the S&P 25 but I cannot get a handle on direction so I will not attempt to pick a direction. Until we get a clearer picture I like no long or short exposure here with clients.
Metals: Inside day in gold with prices coming back down and challenging its 50 day MA. I remain friendly as long as $1590 supports on a closing basis in August. As for upside the 100 day MA would be my target at $1645. Silver futures gave up 2.15% closing back under $28. That level remains my pivot point and as long as prices are below $28 I would not have bullish exposure. Above $28 I like light bullish plays. Copper will need to hold the 50 day MA on a closing basis to hit my $3.61 objective in September. On a breach expect a grind back to $3.35.
Softs: For cocoa to close only 1% lower I was impressed considering the strength in the dollar today. Longs need to have an exit strategy as we could have a correction lower. My take is tighten up stops as longs should have a nice profit after the recent 12% appreciation. Sugar failed to hold onto sizeable gains closing back under its 100 day MA. Being prices have completed a 61.8% Fib retracement exit longs here as well. Cotton closed lower for the first time in five sessions losing nearly 3%. 74.50-77 remains my upside target but there is an equal amount of risk so walk away until the risk/reward improves. Coffee hit both my targets (the 50 day and 100 day MAs) therefore I would be out of longs. Over the next few days I may advise shorts…stay tuned.
Treasuries: Treasuries are in a holding pattern back and forth hovering around their 9 and 20 day MAs. Tomorrow’s jobs number should determine the next leg. I am interested in having bearish exposure but I need a favorable set up to issue a short recommendation in 10-yr notes and/or 30-yr bonds.
Livestock: Live cattle could go either way…stand aside. Feeder cattle have broken down in recent sessions dragging prices to their lowest close. Look at the weekly chart and prices appear to be headed lower with plenty more downside to follow. In fact a 38.2% retracement of the move since late 2008 could drag prices down an additional 10%. Lean hogs gave up just over 2% today as prices are approaching their short term MAs. I see further depreciation and would not rule out a trade closer to 90 cents in August in the coming weeks.
Grains: It is a perfect storm in terms of the fundamentals in grains and relief does not look to be in site. This will be a case of a trade I told clients to leave too early as Ags continue to race higher. December corn gained 5% today to put corn over $7/bushel back near the 2011 highs and above their 2008 highs on this contract. While I remain bullish I do not see this pace sustainable and cannot rule out a nasty profit taking led correction so be cautious. Soybeans leapt 3.5% as prices are fast approaching the $16/bushel level. Upside resistance comes in about 30 cents higher than current pricing which is the 2008 high. Like corn I fear a correction so do not get sucked in initiating positions at these levels unless you are adding to a winner…in my opinion. Wheat gained 4% today to complete a 61.8% Fibonacci retracement lifting prices to 10 month highs. This whole complex should trade together but gaps on the way up should be filled underneath the market so consider yourself warned.
Currencies: The US dollar gapped open and closed 1.3% higher back at last week’s highs above the trend line. Tomorrow’s jobs number is the key but as long as prices remain under 83.50 my stance remains bearish. A breach of that level I will be forced to re-evaluate. All European currencies were hit today but what was interesting was the commodity currencies held their own. Expect some forex trade recommendations next week and not sooner.
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