Energy: After the near 5% slide Wednesday in Crude oil the fact that bears could not follow through Thursday leads me to believe that we will not see much more downside. That being said I did advise some clients that previously did not have exposure to scale into longs in January futures. I see prices back near $90/barrel in the coming weeks. RBOB was also a slight gainer closing higher by 0.71%. We will need to retake the 9 day MA for me to think momentum is shifting back to the bulls. There was divergence in heating oil as prices moved lower again today closing down by 0.23% just off its lows. $2.95 will need to hold in December or we could see $2.85. Lower trade was rejected in natural gas as prices closed higher by nearly 1% near the recent highs. As long as the latest lows hold I like light bullish exposure. I am looking at risk:reward of 2:1…trade accordingly.
Stock Indices: The S&P lost 1% to close at fresh 3 ½ month lows. Now that 1380 has been breached in December futures the next significant support is 1360. I do not expect a major meltdown and would expect a rebound in the coming weeks. The Dow closed lower by 0.68% also at 3 ½ month lows. Under 12900 I see the next support at 12650. Given the opportunity aggressive traders could use those setbacks as buying opportunities to play a bounce in the coming weeks. In the S&P that would represent a correction of 6.8% and in the Dow 6.6%.
Metals: Gold has recouped all its losses from last week and is trading back at 2 week highs just under its 50 day MA. A $60 appreciation in the last 4 days and those that were nimble enough to buy on the most recent dip take a quick profit on a portion of your recent purchase. Quick profitable trades like this should be booked in my opinion. Silver has also rebounded closing again over the down sloping trend line adding 1.83% today in December futures. I offer the same advice in this metal. The next target is the 50 day MA at $33.25 and if the dollar starts to back off I would not rule out $34 plus on this leg. Role the die with a smaller portion of the trade would be my suggestion.
Softs: 2.58% loss in cocoa today as on the third attempt in the last month the 200 day MA gave way. From here we should challenge 2300 and if that gives way look out below. I have no client exposure. Sugar added to its recent losses giving up 0.58%. Until we get signs of an interim top do not add to your existing positions. For fresh entries I still prefer bull call spreads just lower your strikes. Cotton lost 0.82% to close at a 4 month low. Prices are already so oversold but I have long entries on my radar at lower levels. $1.50 remains the line the sand in December coffee…let’s see if it stands into next week.
Treasuries: 30-yr bonds were higher by 0.58% and within tics of their September highs closing above my 151’00 objective from previous weeks. Above that level we could see more buying come in so at this juncture I’m not comfortable with outright bearish plays. However I do like scaling into NOB spreads…see the chart of the day. So much for the triple top I speculated on yesterday as prices are currently at 4 month highs in 10-yr notes. Do not rule out a challenge of the July highs approximately 2/3 of a point above today’s settlement.
Livestock: Live cattle appear to establishing a base finding support at oversold levels. We traded above the 9 day MA today settling just under that pivot point. Bullish plays are on my radar but I’ve yet to act on behalf of clients. Inside day in feeder cattle also registering a small victory. The problem here is support is a long way from today’s close so I view this as too large of a risk for now. Higher trade was rejected in lean hogs but I would still be in bull mode after yesterday’s clear bullish break out.
Grains: USDA report tomorrow so expect some volatility. The 50 day MA continues to cap upside in corn as prices have been unable to recapture that level since the middle of September. Without a surprise tomorrow I would expect prices to grind lower. My suggestion is have stops just above that pivot point sand as always lighten up into the report. January soybeans gave up an additional 0.75% today closing under $15/bushel…a big psychological level. I’m still eyeing the gap in the chart from early July roughly 20 cents from current levels. Echoing yesterday’s comments the best looking chart in the Ag sector remains wheat. Futures have closed higher the lat 5 sessions and with prices back over $9/bushel wheat should be back on your radar. It’s all up to the USDA short term but the fundamentals are supportive.
Currencies: Stochastics on the daily chart say oversold so I’m wandering how much gas the bulls have in their tank in the dollar. The Euro is finding support at the 38.2% Fibonacci level the last 2 session but a trade under the lows should drag prices to 1.2600.The Aussie and Kiwi have started to break down and if commodities remain under pressure look for further downside. First downside target in the Kiwi is .7950 and in the Aussie at 1.0150. The Yen is higher by 1.3% the last few days closing above the trend line mentioned in recent posts giving us confirmation of further upside. Those in bullish plays via options should be targeting 1.2700/1.2750 as their exit point to liquidate in my opinion.
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