Energy: Crude oil failed to get thru the 100 day MA with prices closing marginally lower. The 100 day MA has caped upside now for the last 5 sessions. My target in September futures is $87 when prices roll over. That type of move should drag RBOB back near its trend line just shy of $2.80. On consecutive closes under $3/gallon in the September should confirm an interim top. A 38.2% Fibonacci retracement in heating oil would drag prices under $2.85. Natural gas is just over 50 cents from the highs 3 weeks ago as prices are approaching the 100 day MA…my next target.
Stock Indices: Stocks continue to grind higher but the alarming thing is even with prices higher 75% of the days in the last 3 weeks prices have yet to make new 2012 highs. With prices treading water in the last week unable to make any significant headway prices may be ready to roll over. I remain bullish until indices close under the 20 day MA but I would be shaving exposure on all remaining longs.
Metals: Inside day in gold with prices closing back under its 100 day MA. If prices are unable to take out $1630/ounce in the next few session I’d say a move back near $1570 would play out…in my opinion. Silver gave up just better than 1% as prices for the last month have been unable to take out $28.25 on all attempts. If the trading range pattern continues a break lower to $26.50 should play out.
Softs: Cocoa appears to have started the trade lower hinted at last week with a loss of 2.4% to start the week. A 50% Fibonacci retracement puts September at 2260 which also coincides with the 100 day MA. Sugar has closed lower the last 6 sessions thus putting prices at 6 week lows. There is not a reason to buy but I do feel prices are close to finding support. I do not think prices under 20 cents are sustainable for an extended period. Cotton lost 1.8% and is on the verge of busting the 50 day MA. If December closes below 71 cents I would anticipate a probe of the June lows…trade accordingly. After rolling over last week OJ prices look week and we could see a probe of $1 in my opinion. Coffee has lost ground the last 5 days and I would not rule out further losses. It would take another 7.5% depreciation to challenge the mid-June lows.
Treasuries: 30-yr bonds and 10-yr notes have picked up slightly in the last 3 sessions but prices have remained under their 9 day MAs to date. We could get a further appreciation but I have advised clients to remain in bearish trade as long as the 20 day MAs cap further upside. In September 10-yr notes that level is 134’11 and in 30-yr bonds that pivot point comes in at 150’18…trade accordingly.
Livestock: Live cattle inched higher to close at 2 ½ month high just shy of their May highs. Prices have climbed now for the last four weeks and though I do not think there is much left in the tank as long as prices hold $1.24 in October I’m friendly. In full disclosure as I was getting mixed signals in past weeks I have no long exposure with clients. Feeder cattle broke out of the recent trading range adding just better than 2% today to lift prices to one month highs. Further upside should be seen and the former resistance should now support; $141.50 in September. October lean hogs closed above the 9 day MA for the first time in 2 weeks with today’s 2% advance. An interim lows was likely established last week. A 50% Fibonacci retracement should bring the October contract back above 79 cents…trade accordingly.
Grains: Corn lost just more than 2% but the significant development was prices closed under the 20 day MA for only the second time in the last 2 months. I had thought we were due for higher ground but after the failed breakout to end last week maybe finally a correction? I see no significant support until $7/bushel which would represent a 17.5% correction from last week’s highs. November soybeans gave up 2.6% to close back under their 20 day MA as well. This is a mild sign of weakness but for me to be more confident lower ground is due prices need to penetrate the recent lows approximately 50 cents below today’s close. On further weakness the trend line that has supported the move this entire summer comes in around $15.25 on this contract. Wheat is off nearly 6% in the last 2 days closing near the bottom of the recent trading range. Support is not eyed for another 40 cents. Wheat has largely been a follower so if we experience weakness in the Ag sector wheat could get hit the hardest in my opinion.
Currencies: Status qou in FX land the only viable plays that merit you attention is the commodity currencies look heavy. Aggressive traders could scale into bearish plays in Loonie, Kiwi and Aussie with stops above the recent highs. Traders could also have bearish exposure in the Yen but tread lightly because if stocks sell off the Yen will likely jump higher so have an exit strategy.
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