Bonds triple top in the making

Energy: Crude oil got back nearly half of yesterday’s losses higher by just better than 1% as of this post. Prices are back above the 8 day MA which should continue to serve as a pivot point. At this juncture I am neutral on Crude oil as I think prices could go $3 in either direction. RBOB traded higher by nearly 2% but stopped short of re-taking its 50 day MA. As long as futures are under that level I think there could be more downside. It would not surprise me to see a trade under $3 in the May contact. An inside day in heating oil as prices were higher by 0.80%. Prices have yet to trade back above the 8 day MA; about 2 cents above today’s highs. The most viable trade idea I have in this complex is long heating oil/short RBOB expecting that spread to narrow. Currently RBOB is trading at a 10 cent premium in May. Natural gas prices closed in the red today for the first time in the last 10 sessions. In that time frame prices have appreciated just shy of 50 cents or 15%. I had previously advised bearish trade and those that followed this trade it has been painful. Fresh entries could get short futures with tight stops. I still am expecting a correction very soon…both the 50 and 100 day MAs are 40-50 cents lower.

Stock Indices: The 9 day MA has been tested the last 3 sessions in the S&P index and held. That line needs to be penetrated and currently comes in at 1535 in June futures. I have opted to stop advising bearish trade until we get that confirmation. However I continue to recommend clients that have large stock portfolios to lighten up and book partial profits on their holdings. After a 12% appreciation ytd recognize nothing moves in a straight line. Similar sentiment in the Dow as we’ve only experienced 3 losing days in the last 17 sessions. Prices remain just off record highs. A settlement under the 9 day MA should signal lower trade to follow; currently that pivot point is 14235 in June futures.

Metals: After 4 connective days in the green gold futures finally gave up ground trading lower by just over $5 today. Prices were currently trading near the upper end of the range prices have been in the last 30 days. The next few sessions I expect a decision to be made; either we break out higher that would mean likely $30/ounce or we trade back near the lower end of the range $30 lower. I am still in the bull camp looking for continued appreciation. Clients of late have been advised to gain bullish exposure long futures and selling out of the money calls 1:1. Silver has been sideways for nearly 1 month…like watching paint dry but do not expect that to last. I have used this consolidation period to accumulate silver for clients and would recommend you do the same. I expect in the coming weeks to see prices over $30/ounce.

Softs: Cocoa closed higher by 2.53% and on further appreciation in the coming sessions we could take out previous resistance that has held the last 2 months. I think scaling into bullish trade makes sense targeting 2300 in May. Sugar closed just under its 20 day MA and from here prices could go either way. Some of my clients own bullish trade from several months ago and they should stay the course. Fresh entries hold off for now. Cotton gave up 2.25% today closed just under the 9 day MA. Prices are almost 4 cents off their highs made last week. Could this be the interim top I’ve been calling for in recent weeks? A 50% Fibonacci retracement on the leg that started in mid-November drags prices back near 82 cents on the May contract. A bearish engulfing candle on the daily OJ chart giving up 3.25% today. A close under the 9 day MA today should signal lower trade. My objective from here on May futures is $1.25. It took 8 trading days but finally coffee closed in the green. I’m expecting to find value around current levels and see a grind back to $1.40 into next week in May futures.

Treasuries: 30-yr bonds closed lower on the session but did hold its 9 day MA. We may have a triple top in the making based on the last 3 days…stay tuned. Aggressive traders can get short with tight stops in my opinion. 10-yr notes also failed to hold onto early gains after the Fed meeting prices started to peel off. It will take a close under the 9 day MA in both instruments for confirmation. Those pivot points are 142’23 and 131’01 respectively. I think it is a viable strategy to start working back into bearish trade in late 2015 and early 2016 Euro-dollar bearish plays as well. My favored play remains outright shorts in futures.

Livestock: Lower trade has been rejected in live cattle futures the last 2 sessions. Aggressive trades can start probing bullish trade in June contracts. I like the idea of long futures and selling out of the money calls 1:1. My first objective in the June contract is $1.25. Feeder cattle continue to work lower with today’s losses dragging prices to fresh 7 month lows. I think we are close to finding value but I am awaiting more evidence…stand aside for now. Lean hogs did mange a positive close today but a small victory for the bulls being prices are just off 10 month lows. I have bullish trade on with some clients and they are underwater. If this does not prove to be a bottom I will likely advise cutting losses…stay tuned.

Grains:Corn advanced 0.55% today adding to recent gains that have advanced 50 cents in the last 2 weeks. Another 20 cents will lift prices back to levels seen in early February. As long as prices remain above their 9 day MA I am friendly, that level in May is currently $7.17. Soybean futures held the $14/bushel level after getting within a dime the last 3 sessions. In fact today was the first day in the green in the last 7 days. A settlement back above the 50 day MA; currently at $14.25 is needed to signal an interim low. The standout today in the complex was wheat but perhaps I say that because it is my largest Ag exposure with clients. May gained nearly 2% closing above the trend line mentioned in previous posts. We are just shy of the 50 day MA and I think in the 2nd inning of the move. My first objective is the 38.2% Fibonacci level just shy of $7.80/bushel.

Currencies: The dollar index appears to be having trouble getting above 83.25…resistance for the last week. Operating under the influence prices could retrace from here the first stop should be 81.75. The Euro and Swiss can be bought with tight stops. It will take a trade above their respective 20 day MAs for confirmation at 1.3050 and 1.0630. The Pound close above the 20 day MA in a wild session I’ve advised light bullish exposure with a current target of 1.5270 in June futures. I have no practical plays in the commodity currencies long or short currently…stay tuned. Inexpensive April or May call options are the only way I’d play a potential jump in the Yen. Picking a bottom with futures is far too aggressive in my opinion at this juncture.

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