Energy: Crude oil has competed a 61.8% Fibonacci retracement losing almost 2.5% today trading under $86/barrel for the first time since mid July. I advised clients to book profits on their bearish trades and I will be looking to re-establish shorts in further out contracts in the coming sessions. I think we could see an additional 4-6% decline after a slight bounce. RBOB traded lower again today making it 9 consecutive sessions trading under its 100 day MA for the first time since late July. Next support in December is seen just above $2.50. Do not rule out a bounce after the near 30 cent loss in the last 2 weeks. With the 1.19% loss in heating oil today prices are only pennies away from a trade under $3/gallon. More downside is expected as the 100 day MA is 7 cents under today’s settlement. For hedgers looking to lock in prices before the anticipated winter appreciation I am looking at buying for some clients 15-20 cents lower. Natural gas gained 2.3% on an inside day. The 18 day MA supported the last 2 sessions but I still think lower trade is likely. My favored play is short futures while simultaneously selling out of the money puts 1:1.
Stock Indices: The S&P gave up 1.63% closing at 6 week lows. A correction is under way and I have a target of 1380 in December futures. The Dow failed to hold onto its 50 day MA which supported yesterday closing lower by 1.89%. Only another 75 point loss to complete a 38.2% retracement though I think we could see a 50% move putting December futures at 12750.
Metals: Gold lost just better than 1% getting within $5 of $1700/ounce. On a trade near $1665-1680 I would be booking profits on bearish trades and starting to price out bullish positions into next year…stay tuned. Silver closed lower by 1.77% closing near its lows under $32/ounce. The 100 day MA comes in at $30.25 and though we may not get that low I do think we can get pretty close which means stay the course on shorts for now.
Softs: Inside day in cocoa as 2500 has served as resistance the last few days. As long as prices in December remain above 2450 stay long but put stops just under that level. March sugar lost 2.04% but futures have yet o make new lows. Continue to scale into long plays with stops just under the August lows. Assuming a fresh long entry at current prices that equates to about $300-350 of risk per contract. Cotton lost nearly 3.5% today…note I advised long entries to exit yesterday. On a slight rally in the coming days aggressive traders can look to fade that move thinking we see a trade under 70 cents in the coming weeks. Coffee lost 2.22% but I feel we could get a bounce that would set up a bearish trade from higher levels. If we break down from here I’ll likely miss the trade with clients.
Treasuries: 30-yr bonds traded above their 9 day MA for the first time this week closing just below that pivot point. I see higher trade and open the opportunity to be a seller near 150’00 in December. 10-yr notes appear to be establishing a base just above 132’00 and from my perspective should trade higher. A close above 133’00 and a sale would be back on my radar.
Livestock: Live cattle have lost ground the last 3 sessions trading under its 9 day MA today. Traders can gain slight bearish exposure targeting a trade under $1.25 in December. January feeder cattle closed under their short term MAs as my bias is bearish here as well. I don’t really care for the risk to reward dynamic but I do expect a challenge of $1.46 in the coming sessions…trade accordingly. Today’s chart of the day offers a viable trading opportunity in my opinion; bearish exposure in lean hogs. A close under the 9 day MA and reversal from overbought levels yesterday sets up a trade that I think could put prices of December futures back under 75 cents. My favored play is short futures while also selling out of the money puts 1:1 as a hedge.
Grains: Corn lost 0.70% as the 50 day MA capped any upside once again. Aggressive traders can gain bearish exposure with stops just above that pivot point; in December at $7.65. Four out of the last five sessions soybeans have gained with prices higher by just better than 60 cents. I do not expect much upside but a trade over $15.60 in November should add another 50 cents/bushel. Wheat cannot get out of its own way. Prices broke down today and recent longs should have been stopped at a slight loss. Remain on the sidelines until we get a clearer picture.
Currencies: Impressive move in the dollar today as I did a featured piece on how trade in the greenback affects other currencies and commodities. A settlement over the 34 EMA which is likely should be a game changer and lead to further appreciation. My favored sales against the dollar remain the Pound and Loonie. My targets on December futures are as follow 1.5800 and .9925. Tighten stops on Yen shorts as we could get a bounce after the 4 cent decline in recent weeks. Do not allow the market to take back too much.
By. Matthew Bradbard
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