Interim top in the greenback

Energy: A higher high and higher low and a settlement above the 8 and 18 day MA in Crude. That coupled with outside market influences leads me to believe prices could trade higher. I like scaling into bullish plays targeting a trade over $90 in the coming weeks. For further confirmation a settlement above the down sloping trend line which is approximately 50 cents above current prices. RBOB bounced off its 18 day MA gaining 1% on the day. A trade above $2.70 in January confirms an interim bottom and I would venture to say a trade back to the early October highs. Heating oil closed higher by 0.87% at it 8 day MA running into resistance at the 18 day MA. Resistance on the upside is first at $3.0550 followed by $3.09. After a gap open natural gas prices backed off but still managed to close higher by 0.57%. In 3 days prices are higher by 6.4%. On its highs prices were within 6 cents of the $4 level. I am friendly as long as $3.80 holds in January.
Stock Indices: The S&P lost 1.31% dragging prices to fresh 3 ½ month lows. We are within 15 points of completing a 61.8% Fibonacci retracement so further pressure is not out of the question. My take is most of the damage is done and we should see a bounce in the coming weeks. The Dow has completed a 61.8% Fibonacci retracement trading under 12,540 today losing 1.36%. After six consecutive losing weeks my call is still a bounce…as tough as it is to catch this falling knife my advice is scale into bullish trade.
Metals: Gold continue to chop around in a $15-20 trading range closing marginally higher today. With futures under $1740 I am anticipating a trade lower putting prices back near $1700. Silver has gained 7 out of the last 9 days but in the last 4 prices have tread water unable to retake $33/ounce. A trade to $31.75 in December is my current opinion. The biggest mover in this complex of late has been palladium due to the strikes. In the last 2 day prices had appreciated better than 5% but the 50 day MA has capped this leg for now.
Softs: Cocoa gained 2.93% recouping nearly all of the previous week’s losses. 2500 should be seen in the March contact and perhaps more if the dollar trades lower. Trail stops on open longs. Early gains were reversed as sugar closed lower by 0.57%. We were able to hold onto the 9 day MA but this was not a bullish development. Some clients have light bullish exposure in call spreads and are advised to hold tight. Bullish engulfing candle in cotton today with prices back over 71 cents. I am friendly in March above 70 cents with an objective of 73 cents…trade accordingly. A move may be under way in OJ that I think could lift prices 10% plus above current prices. I have yet to devise a viable strategy but I will crunch #s tomorrow and have some ideas. Coffee failed to make a lower low today gaining 1% after yesterday’s 4.39% route. Bullish back ratio spread in March is the call targeting $1.70 in March.
Treasuries: 30-yr bonds continue to exhibit signs that a top is near and the fact that we did not make fresh highs with the decline in stocks is a positive development for my client’s bearish trades. Typically with a 1% decline in stocks Treasuries would be up considerably and this did not happen. I am waiting for confirmation that prices will trade lower…a close under the 9 and 20 day MAs in both instruments would confirm such action. In December futures I am forecasting a trade back near 148’00 in 30-yr bonds and 132’00 in 10-yr notes.
Livestock: The 0.52% decline in live cattle today erased yesterday’s gains. With a settlement under the 9 day MA that puts me neutral and back on the sidelines in terms of a trade recommendation. The 9 day MA rejected any upside in feeder cattle as prices close lower by 0.87% to fresh 3 ½ month lows. Do not rule out a challenge of the July lows. I’m calling an interim top in lean hogs as aggressive traders can start scaling back into bearish trade. I had previously suggested December but now I would look towards February contracts. The same strategy selling put options against a short futures contract 1:1. A 38.2% retracement puts prices back near 83 cents.
Grains: Corn could be finding its footing gaining the last 2 sessions. It is still too early to tell but those in bearish trade should close out. I’ve started to price out bullish trades in soybeans to play at least a bounce. I think January could trade back near $15/bushel in the coming weeks. Expect trade ideas to follow. Day 4 of wheat prices closing lower but as we near oversold levels the selling is abating. We could still see $8.30 in December on this leg but I would remain bearish as long as prices are under the 50 day MA; currently at $8.65.
Currencies: I’m calling an interim top in the greenback thinking we trade back under 80 in the coming weeks. This represents a loss of approximately 1.35%. As the dollar backs off if that plays out the Swiss and Euro should benefit; aggressive traders can start scaling into bullish plays targeting 1.3000 and 1.0750 respectively. Those looking for a bearish trade need to look no further than the Aussie. This would be confirmed as prices breach the 20 day MA just under today’s lows. Target 1.0100 in December perhaps shorting futures and selling out of the money puts 1:1. With the near 1% decline in the Yen today longs should have been stopped out as soon as the 20 day MA gave way. This should have resulted in a positive trade for positions established last week.
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