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Commodity Market Update - 19.10.12

Energy: Sloppy action in Crude oil today with prices finishing pretty much in line with where they started the session. For the last 7 sessions prices have been in a sideways trading range and today was no different. I see resistance just above $93 and am still looking for a breakdown in the coming weeks. RBOB lost 1.35% today trading lower now for the last 5 consecutive sessions. A settlement under $2.70 in December should lead to a quick move under $2.60 and back to the 100 day MA; currently at $2.5975. Heating oil traded under its 18 day MA for the first time in 2 weeks but support held up. I see the tide shifting and see no solid support until $3.05. Natural gas gained 2.2% closing near its recent highs about 10 cents under $4. I may be the minority but I’m looking for prices to back off thinking we get one solid sell off before we build in a winter premium.

Stock Indices: The S&P failed to hold onto its gains finishing slightly in the red just above 1450. Looking at the price action over the last moth there appears to be a triple top in the making as all previous attempts to penetrate 1460 have failed. I think it will take confirmation of its short term MA but a trade lower is still the call. As opposed to picking a top it is advised to get confirmation though. Doji star in the daily Dow chart with prices dancing on the up sloping tend line. The 13500 level in December futures has acted as stiff resistance in recent weeks and I expect that to continue. A close under 13375 is needed to signal an interim top…trade accordingly.

Metals: Gold lost 0.42% as prices appear to be taking a breath around the $1750 level. I see resistance at $1760 and the next leg lower should test the 50 day MA in my eyes at $1719. I’ve told traders for weeks now not to rule out a trade under $1700/ounce. A bearish engulfing candle in silver today with prices lower by 1.10%. Prices are off just better than 6% in the last 2 weeks. $31.75 represents a 38.2% Fibonacci retracement though $30/75 is my ultimate target which is the 50% level.

Softs: Cocoa appreciated 2.22% to close above the down sloping trend line that has acted as resistance since the highs in early September. This may sound familiar as I predicted this in recent post. From here I am expecting a tradable bounce that lifts prices to 2550/2600 in December. Sugar is within 1.5% of its low trade this year but that alone is not a reason to buy. I am waiting for signs of an interim low before advising clients to re-establish bullish trade in March contracts. A 4 1/2 cent trading range in cotton represent a $2250 range but I would have expected more upside follow through after yesterday limit close and prices closed unchanged today. My target is the 200 day MA just under 2 cents from the settlement but I am looking for a sell signal from higher ground and would not be long currently. Coffee lost 1.8% dragging prices to 6 week lows as prices are slowly making their way to contract lows which I do think will happen. Today’s close is within 3.25% of those levels reached in mid-June.

Treasuries: In the last 3 days prices in 30-yr bonds have broken down better than 3 points dragging prices back near 146’00. I missed this leg looking for a higher sales price. We could see prices drift lower to the levels in mid-September but I am currently on the sidelines with clients. 10-yr notes also exhibited the same pattern breaking down in recent sessions, trading to 1 month lows. The path of least resistance is lower in both instruments but I’ll be absent.

Livestock: Live cattle continue to inch higher gaining 4 consecutive days as prices are approaching overbought levels.  The easy money has been made on longs as I will be looking for short entries in the coming sessions. The rising tide has lifted feeder cattle prices as well with January closing over $1.50 the last 2 days. Resistance that has held the last 2 months comes in just above this level so expect limited upside in my eyes. In a little over 5 weeks prices of lean hogs have appreciated 12% but prices should be met with selling very soon. I see limited upside but prefer to see a settlement under the 9 day MA before calling a top; that level in December is 78.35.

Grains: December corn closed up just over 2% as prices make their way back to their 50 day MA. That pivot point served as resistance last week comes in at $7.66. Above the 50 day MA the next resistance is eyed at $8/bushel. I still think there is risk to the downside and see support at $7.35. After bouncing off $14.90 it appears we could see some appreciation in November soybeans. First prices must get through the 20 day MA but above today’s highs $16-16.20 seems to be a reasonable upside target short term. After finding support just under $8.50 in December wheat we’ve seen a slight pickup in prices. Though wheat will continue to lag appreciation in outside markets could lift prices back near $9 in my opinion. 

Currencies:  The dollar found support again today at 79.00 but sentiment remains bearish as long as prices remain under their 20 day MA; currently at 79.70. Aggressive traders can re-establish bearish plays in the Cable; with stops above the 20 day MA; currently at 1.6110. Another sale in my book is the Loonie. I like the recent chart action and see a trade under par in the coming weeks. I’ve advised clients to look at purchasing at or just out of the money put options. The steadiest performer has been the Yen dropping 5 out of the last 6 sessions. Those short trail stops and protect profit. 

By. Matthew Bradbard

Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals.  You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change without notice.  Past performance is not necessarily indicative of future results.

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