RCM Commodity Update

Energy: Crude oil closed below the 8 day MA for the first time in 3 weeks as prices appear to be rolling over. On its lows prices traded as low as $94.40 but losses were pared by the end of the session. The trend line that has supported since the beginning of June comes in just below today’s lows so on a breach expect selling to intensify. RBOB gained 1.5% to intra-day trade above $3/gallon. Prices closed well off their highs and in my opinion simply overshot in early dealings based on the hurricane activity in the gulf. As long as futures in October stay below $3 I continue to prefer bearish exposure. Heating oil closed well off its highs just above the 8 day MA. The pivot point in the October contract here is $3.15/gallon. I still think that the distillates are due for a break and see 15-20 cent depreciation in the coming weeks. Natural gas closed below its 100 day MA for the second day in a row. All bullish trades should have been closed out either Friday or today at a loss. Next solid support is eyed at $2.50 so expect more selling in my opinion.
Stock Indices: Stocks continue to hang around these levels looking for the next catalyst to get prices moving north or south. Forced into the market I like bearish trade but with a jobs number right around the bend and the Fed speak soon to come I prefer the sidelines. My one suggestion is take some length off in your stock portfolio…take advantage of the 12% advance we’ve experienced in recent months.
Metals: Gold continues to climb closing higher now the last 9 sessions. Prices for the last 3 sessions have been able to hold above the 200 day MA which now serves as the pivot point. In December this level comes in at $1657. Silver has gained nearly $3 ounce in the last week lifting prices to four month highs. This has been a nice run but in my opinion just the start as prices were beaten down so much this could just be the beginning of the recovery. At this point I would not rule out a retracement so use dips to gain bullish exposure.
Softs: Cocoa gapped higher to close 3.3% in the green at its highest levels in 2012. I was expecting a trade lower and clearly wrong…take losses and move on. As long as October sugar futures hold above the lows in June I like scaling into bullish trade. Once prices get moving north I would add to the trade. Cotton closed back above its 100 day MA but as long as fresh highs are not established I prefer bearish trade at these levels. December coffee gained 2.73% closing at a 1 week high. It appears an interim low has been established as prices should appreciate 4-7% in the coming weeks…trade accordingly.
Treasuries: 30-yr bonds have closed in the green the last 7 sessions as prices have made their way back over their 9 day MA. In the September contract it looks like prices could make their way back near 151’00. In the same time frame 10-yr notes have risen back above their 9 day MA as well. My target here is 134’16.
Livestock: October live cattle have completed a 50% Fibonacci retracement though lower ground is expected. To complete a 61.8% retracement that would drag October to 122.25. September feeder cattle traded slightly lower dragging prices under their 9 day MA. Price action is a coin toss and could go either way in my opinion. For the first time in six sessions lean hogs managed a positive close gaining 1.21%. This is a preliminary sign that we’re close to finding a value zone. Aggressive traders could probe longs with tight stops until we get more evidence of a bottom.
Grains: Corn lost 1% today and has traded lower the last four sessions dragging prices under its short-term MAs. Aggressive traders can gain bearish exposure with tight stops. Understand on the December contract a 38.2% Fibonacci retracement would be an 80 cent decline so it’s worth a probe in my opinion. A new high was rejected in soybeans as prices closed out 0.74% lower after trading as high as $17.60 in November. I think $15.50 is a fairer price on this contract than $17.50/bushel but let’s see what the market thinks in the coming days to weeks. Like corn wheat had lost ground the last 4 sessions dragging prices back below $9/bushel. As long as December remains under $9 I like bearish trade with a target of $8.30 followed by $7.90.
Currencies: The dollar index is fining some buying interest around 81.50 and could lead to a bounce but as long as prices remain under its 20 day MA, at 82.40 I’m bearish. The Swissie, Euro and Pound can be sold with tight stops. I’m not expecting in a major break but maybe 1.5-2% on these 3 crosses. As for the Aussie traders could be short with stops just above its 20 day MA. From today’s close this represents a risk of approximately $1,000 per contract.
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