Establish a NOB Spread

Energy: A $4 trading range on the week for Crude oil but prices were virtually unchanged on the week. Prices tried to penetrate $94 all week unsuccessfully closing out the week at the trend line. I am still expecting downside with a target of $90. RBOB gained 15 today to close above $3/gallon and trade at a fresh 2012 high. Exit all bearish trade looking to reestablish once we break below the 8 day MA; in October at $2.96. Heating oil continues to dance around the 8 day MA. I’d like to see a break of the 18 day MA into next week. It will likely take weakness in the entire energy sector for this to play out. Natural gas broke down today losing 3.4% closing back under the 100 day MA. Use that level as resistance now. Based on recent trade recs I’ve been stopped on both sides so I’m walking away until the dust settles.
Stock Indices: Very little follow thru based on yesterday break out action in the stock market. But that is attributed to the unfavorable jobs number this morning. Well I think a bad number could mean QE so who knows in this market? What I do know is I’m on the sidelines and have advised clients with big stock positions to lighten up the whole way up as I do not think it is sustainable.
Metals: Egg on my face…I’ll be the first to admit I thought metals had reached an interim top and I’m wrong. Gold gained 2% today and nearly 5% in the last 5 days. This lifts prices to 6 month highs. I missed this most recent leg and would not be a fresh buyer until prices retraced. For now $1700 is eyed as support with $1670 under that level. Silver gained over 3% today with prices approaching $34/ounce also at 6 month highs. Support is seen just under $33 with next upside target of $35. I have no client exposure as I told traders to get off this train too early. High to low in 2012 copper completed a 50% Fibonacci retracement gaining over 20 cents this week. A strong correlation exists to the stock market currently so I don’t think we will get much more.
Softs: Cocoa may be running out of gas. I say this because even in the face of a falling dollar today cocoa could not get out of its own way. I’m still searching for a sign to get short. Sugar advanced 2.7% today on decent volumes. After getting stopped on fresh lows I’m not ready to advise longs just yet but maybe next week with more evidence. I’m still expecting a break in cotton but first let’s see a trade under the 50 day MA for confirmation. Coffee gained 3% today but just on dollar weakness as I see nothing positive in coffee. After a bounce I may have some bearish suggestions…stay tuned.
Treasuries: 30-yr bonds failed to hold onto early gains trading below but closing just above its 20 day MA. Expect more selling into next week. 10-yr notes are exhibiting the same action but at a smaller degree. This environment in my opinion is perfect for establishing a NOB spread (short 30-yr long 10-yr 1:1).
Livestock: After 3 negative weeks live cattle finished higher this week. I expected prices to roll over here but with stock investor upbeat maybe they are eating more beef. No seriously when equities turn south cattle should follow …I was early on both I guess. As long as the 20 day MA supports prices could grind higher without my clients. Feeder cattle closed lower just under the 9 day MA and on a penetration of the 20 day MA; in September at 143.25 an interim top would be called. Until then stand aside. Lean hogs are approaching 70 cents trading near 20 month lows. A 61.8% Fibonacci retracement on the weekly chart puts prices near 68 cents. As I’ve said a trade in the 60’s has 2013 swing trades on my radar.
Grains: December corn closed out the week under $8/bushel but we’ve yet to see the flush I’ve been expecting. Patience is a virtue as I still like sitting on bearish trade thinking $7/bushel will become a reality before we see a return to the highs. That being said you can have tight stops just above the MAs in my opinion. Great risk to reward. Soybeans have closed lower the last 5 sessions finishing the week under its 9 day MA for the first time in 3 weeks. Next week should be the week we see prices back under $17/bushel. Wheat bounced off its 50 day MA lifting prices back over $9/bushel. Continue to fade rallies as $8.30 remains my target.
Currencies: The dollar got pummeled today breaking 81.00 for the first time in 4 months. More downside is expected but I’m more interested in trading the commodities that could be effected by this move then the dollar itself. All crosses benefited on the dollar depreciation with the biggest winners the Kiwi and Euro. The Commodity currencies should catch a bid in the short run. Depending on stop placemat Yen shorts should have been stopped at a loss today or will next week on any further advance.
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