Clear shot at the Loonie

Energy: Crude oil finished slightly higher today but as I’ve said as long as prices are under $98 in October I remain bearish. I did advise clients to roll their positions today for October to November but stay short. In the coming days I suspect prices will trade south towards $90. RBOB inched out gains to close at fresh 2012 highs just shy of $3.05/gallon. Limited upside should be seen in my opinion but I’m still waiting for a settlement under the 8 day MA. A rising tide lifts all boats as heating oil finished 0.40% higher today. $3.21 in October should cap further upside. Two successive leaps in natural gas gaining nearly 7% today and 4.85% yesterday. A 61.8% Fibonacci retracement was completed with prices trading to the $3 level mentioned several weeks ago. Unfortunately followers were jigged out of positions and spectators if they listened to me. 5-6% dips can be bought by aggressive traders moving forward.
Stock Indices: Stocks held their own keeping their head above water in day one of the Fed meeting. Expect fireworks tomorrow afternoon to set the tone. My opinion is that all good is priced in and there is a higher likelihood of disappointment unless QE begins tomorrow which I do not foresee. If a leg lower resumes my downside target in the S&P would be 1370 and in the Dow my first target would be 12800.
Metals: After the $50 advance in gold prices have been sideways consolidating around $1735 in December. The immediate direction will be determined by the FOMC tomorrow. I suspect a break above $1745 or below $1725 will set the direction of the next leg. My bias is a move lower and see first support around $1680. Silver again failed to take out $34/ounce on the upside on an inside day today. If $34 is not penetrated tomorrow I think a trade back near $32 is in the cards. Any traders long copper were advised to book profits capitalizing on the 7% appreciation in the last week.
Softs: Cocoa has trade in the red the last three sessions as an interim top may be in the making. A trade in December back to the trend line puts prices back at 2475. Conversely sugar appears to be making an interim bottom trading higher the last three sessions. Neither moves are significant on a % basis but appear to be a turning point. I’ve advised trades to scale back into bullish plays in 2013 sugar positions. Cotton appears to be rolling over failing to breach the down sloping trend line. Confirmation would be a trade under the 50 day MA at 74.50 in December. Coffee gained an additional 2.25% today lifting prices over the 50 day MA for the first time in 5 weeks. Bearish trades are now on my radar but let’s see a few days action. I will likely be pricing out bearish ratios trades in the coming sessions.
Treasuries: December 30-yr bonds closed under their 20 day MA the last 2 sessions. Use the 9 day MA as resistance and if prices remain under that level I would remain in bearish trade with a target of 146’00. While 10-yr notes have moved in the same direction prices have yet to penetrate their 20 day MA. Like bonds use the 9 day MA as your pivot point and my target on the downside is 131’00 in December. The NOB spread is still my favored play.
Livestock: Live cattle gained just better than 1% today to lift prices to 5 month highs. Prices are approaching over bought levels so I do not see much more upside but I would wait for an interim top before probing bearish trade again. November feeder cattle continue to gravitate around their 9 day MA. I see limited upside here as well. This week lean hogs have started to bounce and as of this post are trading back above their 9 day MA. I like bullish trade as long as 71 supports in October. A 38.2% Fibonacci retracement puts this contract back over 76 cents…trade accordingly.
Grains: In 3 weeks corn prices have lost 7% and are now within pennies of their 50 day MA. Prices have been above that level for the whole of summer and a breach of $7.75 should open up a move back near $7/bushel. Understand trader’s likely lightened up on longs ahead of tomorrow’s USDA so this report will be market moving and set the tone in the coming weeks. Soybeans have breached the trend line that has held all summer and with the overnight trade come close to completing 38.2% retracement. Further deprecation should be supported in November at $16.65 followed by $16.40. On a bearish USDA report do not rule out a challenge of the 50 day MA just under $16.20. Wheat remains a follower of corn trading slightly lower today. As long as prices are under $9/bushel I would be in the bear camp targeting $8/8.30 in December.
Currencies: The greenback lost 0.63% today dragging prices near 5 month lows. Looking at the chart price may attempt to fill the gap in the chart from 5/1. This would take the September contract to at least 79.275. As I voiced yesterday as long as the dollar is under pressure expect other crosses to grind higher. The Euro, Pound and Swissie all traded to 4 month highs today and should see those gains extend in the coming sessions. The Commodity currencies will also well bid. The best looking chart in my opinion is the Loonie. My only fear is that when metals and energies correct it could get hit hard so those long trail tops. As long as prices remain under last summer’s highs I think we get a decent correction. I am not ready to get clients positioned short but I think when I do I could ride prices back under par. Shorts in the Yen should have been stopped at a loss.
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