Matt’s Futures Market Commentary

Energy: Crude oil has tested the up sloping trend line the last 3 sessions but has yet to penetrate that stiff support level. I suspect Crude will soon make its way to $90/barrel on the October contract. RBOB ended the day lower after probing higher levels in early dealings. As long as $3 is not penetrated I would be looking for a retracement. A 20-25 cent correction is what I feel is in the cards if Crude can trade to $90. Heating oil failed to hold onto its gains as well losing 1% today. $2.90/gallon is my call on this contract but it needs to happen now. The longer prices of the distillates remain above their 8 day MAs the tougher it will be to see prices break down. At their highs natural gas penetrated the 38.2% Fib level gaining the last 4 sessions. $2.75; the 18 day MA is eyed as support with my upside target remaining $3 in October.
Stock Indices: Stocks finished slightly lower but prices remain above the up sloping trend line that has held all summer. To see a major meltdown prices will need to penetrate 1385 in the S&P and 12975 in the Dow. On that I would expect an additional swift 2% depreciation.
Metals: Gold futures probed $1700 for the first time since late March with price closing just shy of that pivot point. After a $100/ounce appreciation in the last 2 weeks do not rule out a retracement. Prices in December could trade as low as $1625 with no near term chart damage. I am bullish longer term but would wait for a correction before adding length. Silver added 3% today to close above $32/ounce for the first time since mid-April. Like gold I am bullish longer term but understand we just added 16% in the last 2 weeks and it is not healthy for a sustainable move for prices to move in one direction. While we could trade to $33 I would not rule out a trade under $30/ounce before much higher ground. I like scaling into bullish trade out until 2013 on dips and purchasing bull call spreads in both instruments.
Softs: Cocoa is 3% off its recent high with the gap lower trade today. Aggressive traders could take a bearish position. I like bearish ratio spreads as after a 30% appreciation in the last 2 months we could get a decent trade lower. Do not rule out a trade under 2400 in September. With the 2.25% drop today sugar is approaching the June lows and if those levels are breached I would close out bullish trades at a loss. My opinion prices are too cheap but that does not mean we cannot see further liquidation. Cotton was lower by 2% but held the 50 day MA; continue to use that level as your pivot point. In December at just above 75 cents. Coffee continues to tread water near its lows. My stance remains sell if and when prices can get closer to $1.75 in December.
Treasuries: 30-yr bonds were in the red today but that is only the second negative close in the last 12 days. Close out bullish trade as prices appear to be rolling over. Inside day in 10-yr notes with prices closing lower as well. It is premature to get short but that is likely the next move. Shorts in both instruments are on my radar and I will also entertain recommending NOB spreads…stay tuned.
Livestock: Live cattle have gained for the last 5 days and as long as prices remain above their 20 day MA I am mildly bullish. However I would prefer to establish long trades from lower levels and currently have no client exposure. Feeder cattle remain near their 2 week highs just under $1.46 in September. Momentum remains bullish but I’d have to see a break to have any interest in being a buyer for clients. Lean hogs are cheap enough and the risk is small enough to nibble at longs but I’d keep your size small. I like long futures while simultaneously selling out of the money calls 1:1.
Grains: $8 remains a magnet for December corn with prices closing within 15 cents of that level for the last week. Aggressive traders can take on bearish positions with stops just over $8.20 in my opinion as $7.15/7.25 remains my target. On their highs soybeans were within 11 cents of $18/bushel but as of this post prices are 37 cents off that level. I would need to see confirmation but once an interim top is signaled this Ag could fall hard. Is the crop horrible…yes…but how much of that is already factored in. It will boil down to if these higher prices affect demand. Wheat remains the weak sister closing down the last 3 sessions putting prices back under their short term MAs. $8.30 represents a38.2% Fibonacci retracement.
Currencies: The dollar index has been able to hold above 81.00…could a dead cat bounce be in store? The Kiwi and Aussie have been hit the hardest of late which is interesting as they generally trade off metals and energies and they have not lost ground of late. Maybe the markets are trying to factor in lower rates in these two countries to come? If short remain short and continue to trail stops as we could see an additional 2-3%.
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