Energy: Any upside was rejected in Crude oil with price closing near their lows down 2.25% as of this post. Prices are below their 100 day MA which should confirm more selling. My target in December remains $87/88 in this contract. The 8 day MA capped buying today in RBOB with prices off 1.87% trading below $2.70/gallon. The 100 day MA comes in at $2.60 and should come into play in the coming weeks. A bearish engulfing candle on the daily heating oil chart with prices down 1.45%. This leg lower should get the December contract close to $3/gallon in my opinion. The only positive in the energy sector today was natural gas trading 0.75% getting December closer to $4. This is a fresh 2012 high but a correction is eminent in my opinion. Some traders that are getting hurt but their short futures potion should be somewhat offset by their short put options.
Stock Indices: Today’s chart of the day is the S&P as I identify a potential triple top in the daily chart. As of this post we have a trade 1.6% lower as we are testing the 50 day MA. It is premature and it will take a close under the up sloping trend line but I do expect that to play out in the coming weeks. A close under 1425 in December futures should get prices moving towards 1380 in my opinion. The Dow is lower by the same % testing its 50 day MA on its lows. A close under 13260 would likely lead to a 38.2% Fibonacci retracement putting December futures at 12925.
Metals: Gold is lower by $22/ounce trading to 1 month lows testing its 50 day MA as forecast. We may see mild support at this pivot point in my eyes but I’m expecting more downside. $1700 should support and then under that level next stop should be $1675…trade accordingly. Silver is down by 2.35% under its 50 day MA challenging $32/ounce having lost better than $3 in recent weeks. There should be some support around $31.75 and then under that level $30.75. Shorts stay the course and those looking to buy I expect bullish trades in the coming weeks from lower levels.
Softs: Cocoa appreciated 2.09% today at 2 week highs as prices are nearly 6.5% off their lows this week. I see more upside short term and have a target of 2550/2600 on longs. For now it looks like 20 cents will hold in March sugar so aggressive traders can probe bullish plays with tight stops. If we gain more traction next week I’d be willing to add to bullish trade. If December cotton cannot retake 78 cents early next week I’d say the upside is over on this leg. I am not establishing bearish trade just yet but without follow thru from the appreciation early this week upside could be limited. Coffee gained 1.92% and though I may leave some money on the table I’d exit bearish plays book profits and move to the sidelines. I feel there is a risk that we get an appreciation…just a hunch and bears should have a decent profit.
Treasuries: As long as stocks trade lower we should see a flight to quality bid higher in Treasuries; displayed by the .080% gain in 30-yr bonds today. I see support in December just above 146’00 and we could challenge this week’s highs moving forward in my opinion. A bullish engulfing candle in 10-yr notes with a gain as of this post of 0.27%. 131’25 should support the December contract and on a leg higher resistance comes in at 133’10 followed by 133’25.
Livestock: After four positive sessions live cattle closed out the week with a slight loss down 0.53%. Aggressive traders can probe bearish trade as December should back off in the coming weeks. My favored play is short futures while simultaneously selling out of the money puts. My target is $1.2450. Feeder cattle also lost ground today but the chart action is not as compelling in my eyes. I see resistance in January just above $1.51 and once prices confirm a trade lower I would be targeting a trade under $1.47. Lean hogs ended the week on a positive note gaining 1% today. The last time prices in this contract were above 80 cents was late July but we are almost there. I like probing bearish trade thinking an interim top is very near. I feel a more appropriate price is 75 cents and would try to initiate a small position to capitalize on a move to that level in the coming weeks.
Grains: The 50 day MA capped rallies in December corn today much like it did on its last attempt. This level will serve as a pivot point into next week. A trade above that level expect $8 and if we fail look for a trade back to $7.25/bushel. The 20 day MA was the resistance level in November soybeans, as prices were unable to hold onto early gains. $15.70 is your upside resistance while $14.85/14.90 is your support. I am expecting a bounce in the coming weeks but it’s a challenge to see any real upside in grains considering outside markets in my opinion. Wheat alone should experience some upside but set your expectation as the most I see is potentially 30-40 cents/bushel and that does not excite me being the risk is not much less than that in my opinion.
Currencies: With the last 2 days appreciation the dollar has made its way back to its 20 day MA where it closed today. A further appreciation could pressure other crosses so pay very close attention to this pivot point; 79.70 in December. I continue to like bearish exposure in the Cable and the Loonie. The Pound traded down to its 50 day MA today and on a breach of 1.6000 early next week 1.5858 should be the next stop. The Canadian dollar broke the trend line mentioned in previous posts that has supported since June. Prices have been above par since early August but I expect that to change in the coming weeks. It is not simple but what I’ve told clients is that as metals and energies trade lower as too should the Loonie. Continue to trail stops in the Yen and milk what the market will give you.
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