Energy: Crude gained nearly 5% to close back above $91/barrel. I counted my chickens before the eggs hatched as the 38.2% Fib level held the last two weeks. Strong support is seen just above $87 in September. Upside is seen at the 100 day MA at $94.55. In the last 3 days RBOB has gained nearly 20 cents to lift prices to four month highs. The trend line has been breached and now we could have a trend reversal. What was resistance is now support just under $2.80 in September. Heating oil picked up 3% to trade up to the 100 day MA. Prices have been below this level since late April. On a trade above $2.95 the next stop should be $3.10. Natural gas traded lower the last 4 days and is currently 40 cents off the recent highs. I think you could see an additional 7-10% into the next few weeks.
Stock Indices: Stocks got back the weeks losses today gaining 1.75-2%. I’m not convinced the economics justified a higher road but further QE may be getting factored in and don’t fight “Mr. Market.” As long as the 9 and 20 day MA continue to support play a grind higher. Those support levels are 1355/1360 in the S&P and 12800/12850 in the Dow.
Metals: Gold finished out a losing week with a small victory gaining 1.17% closing back over $1600/ounce. Until we see a close under $1580 or above $1620 I call for a trading range. Silver closed out the week strong as well gaining 3% today nearly fighting back to $28/ounce. For the last two months silver could be bought on dips but price have yet to gain much traction. On signs of QE expect prices to gain some momentum north. If prices could muster a move to $29 I would call a bottom in place. Until then trade the range.
Softs: Cocoa failed to hold onto all its gains but prices did trade to 5 ½ month high. If the dollar continues south expect higher ground though the easy money has been made as prices have appreciated 12% in the last 3 weeks. Sugar has lost ground in the last 2 weeks having traded under the 50 day MA today for the first time since early July. My target remains the 100 day MA about ½ cent from current levels. Cotton followed the equity market higher gaining over 4% close to the daily limit. The 50 day MA at 70.70 is support with upside resistance in December at 77.50. Coffee should leak lower but I would play the breakout; above the 100 day MA at $1.7620 or below the 50 day MA at $1.6945.
Treasuries: 30-yr bonds and 10-yr notes closed lower for the second week in a row near the bottom of the recent trading range. Remain short as long as prices are under their 9 and 20 day MAs. Expect the inverse relationship to securities to continue playing out. On a further appreciation in stocks do not rule out a 38.2% Fibonacci retracement. That would drag September 30-yr bonds near 145’00 and 10-yr notes near 132’00.
Livestock: October live cattle are trying to decide where from here. My inclination is for lower trade so let’s see if the 9 day MA can hold going into next week. In October at 124.25. August feeder cattle finished higher for the second week running just above its 20 day MA. An interim low looks like it has been established as dips can be bought. My upside target is $1.45. Lean hogs broke hard this week dropping 7.5% to fresh lows. There does not seem to be an end to the selling in sight.
Grains: After probing the 9 day MA for the last 3 sessions corn was able to finish the week higher closing above $8/bushel. Prices have failed to make higher ground so aggressive traders could gain bearish exposure with tight stops. I’ve been saying for weeks a correction is due but every dip has been bought…stay tuned. November soybeans held the 20 day MA just under $16/bushel but prices did lose ground for the second week in a row. A close under $16 in this contract would likely lead to trade closer to $15…trade accordingly. Wheat too has lost ground the last two weeks but prices have done a god job of paring losses. This week prices will close 35 cents of their weekly lows. I’m still searching for a trade closer to $8/bushel in the December contract.
Currencies: All week it appeared the dollar was going to hold on but a break today has me thinking further downside is possible. I will look for more evidence early next week. The 20 day MA at 83.30 should serve as your pivot point. The only clear trade to me is a sale in the Yen. Those that probed shorts in the commodity currencies should have stops above their recent highs. That way on further appreciation you can take your loss and move on.
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