Energy: July Crude oil held its 8 day MA on an inside day. I say lower from here but would only take small bets. My suggested play is short August futures and selling out of the money puts1:1. I’m only looking for $3-4 so if the market delivers cover. RBOB gave up 2% today failing again at the 50 day MA…see previous comments. We may get the 10 cent decline forecast yesterday by week end. Cover existing shorts in July on a trade under $2.75. Heating oil remains above its 8 day MA but should see downside ahead as well. I expect it to hold up better and am looking for an entry to get long heating oil/short RBOB. The spread moved 3.25 cents today. Natural gas has appreciated 7% in the last 3 sessions. This one got away from me and I will not get in unless we see a pullback. Those in the trade should target $3.35/4.40 in July.
Stock Indices: Another positive day but of course it was Tuesday. It has been either 18 or 19 Tuesdays in a row that equities have been in the green…this will continue working until it doesn’t. By no means are we showing signs of weakness but the indices did fail to hold onto most of their gains the last 2 sessions. FOMC minutes are released and Uncle Ben is speaking tomorrow. If there is any talk of the Fed taking their foot off the gas I think it could be a catalyst to see a correction…stay tuned. As I’ve said in recent posts on a trade lower my initial objectives are a trade under 1600 in the S&P and 14700-14800 in the Dow.
Metals: Gold failed to follow through after yesterday’s reversal trading marginally lower today. There can be an argument made that the same support that held in April will hold once again but I have not bought into that just yet. I am waiting for further evidence and want to be assured $1350 will hold. Flip a coin in terms of the short term direction. Inside day in silver as well with silver unable to gain any traction. For now $22 is the line in the sand but I cannot rule out lower trade just yet. The metals are on my radar but I do not see urgency to be in. There will come a time when we can be an aggressive buyer but that time has no arrived in my eyes.
Softs: Cocoa picked up nearly 2% today closing back above its 9 day MA. Aggressive traders can scale into bullish trade with stops under the recent lows. Lower trade was rejected in sugar with futures ending 1% off their lows. If July retakes 17cents I would be mildly interested in pricing out bullish trade. Cotton appears to have started its next leg lower giving up 2.24% today. I have objectives at 82 cents followed by 80. Coffee has been in the red the last 6 days dragging prices to multi-year lows. The last two days I’ve bought that weakness for clients starting to build bullish trades in September and December.
Treasuries: 30-yr bonds finished in the green but were unable to retake their 100 day MA. Aggressive traders could lightly work into bullish trade with tight stops. 10-yr notes have been supported by the 100 day MA as the 50 day MA I eye resistance. I’m calling an interim low. For a trade idea I like NOB spreads; long 30-yr bonds/short 10-yr notes. Book profits on Eurodollar shorts and plan on re-establishing bearish trade after the coming rally.
Livestock: August live cattle are back above their 9 day MA. I’ve suggested bullish trade and see further appreciation to follow. On a trade above the 20 day MA be willing to add to your position. Stand aside in feeder cattle as futures continue to exhibit weakness. Let the dust settle in outright directional plays in lean hogs as I have no clear buy or sell signals. The only suggested exposure is selling hogs against cattle in June or August.
Grains: Today’s chart of the day is maize. The clear message is new crop corn is a buy near $5/bushel. For more in depth coverage read today’s piece. Old crop soybeans have put on $1.30/bushel in the last month…take your money and run as we are reaching overbought levels. 7 month highs were reached in July soybean meal …trail stops but the easy money has been made. This was a great bullish trade as futures gained 12% in the last month. I gravitate to solid figures in the Ag sector…I think CBOT wheat can be bought near $7/bushel in the December contract. Wheat will follow corn in the coming weeks and with weather premiums likely I think it is worthy of a nibble.
Currencies: The last 2 sessions the dollar has made lower lows and lower highs. As long as new highs are not reached I would be targeting a trade back to the 20 day MA in the coming weeks, currently at 82.90. The Euro can be bought with stops under the recent lows. All commodity currencies should be bid in the coming sessions but I see the Aussie as the leader. My suggestion has been to work into bullish trades the last 2 sessions anticipating a move back over parity. I see a bounce in the Yen as well but would only play with inexpensive options as every attempt at picking a bottom has been to no avail.