Energy: Crude will end up gaining over 2% today, closing over the eight-day MA for the first time since the beginning of May. This is a preliminary sign that an interim bottom has formed. On further evidence, perhaps a trade over $87 into next week, add length to your bullish trades. RBOB advanced 1.4%, closing over its eight-day MA as well. This base may prove to be the summer lows … stay tuned as we should know if that is the case by this time next week. Heating oil managed to stay above $2.60, picking up 1.2% today. This distillate, however, did not close over its eight-day MA, which is approximately one penny over today's settlement. A trade above that level should lead to a swift move back near $2.80 … trade accordingly. Today's chart of the day was natural gas, which closed higher by more than 15% on the front month. A major reversal and likely a summer low was established, in my opinion. After a near 60% price decline in the last year, there could be a hefty bounce if traders were to gain some bullish momentum.
Stock Indices: A 1.3%-1.4% appreciation in equities has lifted prices back near their 50-day MAs. I expect further upside, thinking that positive news out of Europe will ease some of the fear premium that has been factored into the stock markets in recent weeks. That being said, I do not expect a fresh bull market, but rather a grind higher that should set up a selling opportunity from higher levels.
Metals: August gold settled over its 50-day MA as prices appear poised for higher ground. I see support around $1,600 with an upside target of $1,660/$1,670. While gold closed higher, silver actually gave up some ground today, losing 1.25%. While $28 remains as support in July, I would feel a lot more confident if we can close over $29 going into the weekend. Copper closed in the green by 1%, as I maintain my conviction that appreciation is around the corner. Resistance is eyed at $3.44 followed by $3.54.
Softs: Cocoa was able to maintain the 50-day MA, closing slightly higher today after losses in early dealings. Prices are approaching overbought levels, so trail stops. Move back to the sidelines in sugar as I'm getting mixed signals. This should represent a B/E trade. Cotton failed to hold on to its gains on the back months, but I still maintain that we need to see further appreciation before gaining bearish exposure. Coffee is approaching two-year lows and there does not seem to be any slowing of the selling. This was a great short trade that I unfortunately left too early.
Treasuries: As long as prices in debt instruments remain between the two MAs mentioned in recent posts, I would not take a big stance either way. Obviously, regular readers know my bias as I am anticipating a break in the coming weeks. In fact, if the MAs cross and the 20-day MA is above the nine-day, this would be the first time since late March when prices were substantially lower. This would be further confirmation a trade lower should ensue.
Livestock: A near 1.25% deprecation in live cattle today has prices down 3.5% this week and prices at a one-month low. More downside should follow, and I would not rule out a challenge of the late-April lows. Feeder cattle exhibited similar performance, losing 1.25% today and 3% on the week. Prices in September have completed a 50% Fibonacci retracement, though more downside should be seen. I'm targeting a trade under 155.00 in this contract. As long as lean hogs remain below 84.00 in October, I like bearish exposure targeting 80.00.
Grains: Corn has traded back down to near the bottom of the recent trading range, off roughly 30 cents this week. I've advised scaling into longs in December, having a small long position into month-end. Wheat picked up 1.25%, and my advice is the same: July longs stay in the trade with stops just under $6.10. November soybeans lost ground today and have closed in the red three out of the last five sessions. I'm looking for a larger leg down and have advised aggressive traders to gain bearish exposure, thinking we could see a 2%-3% break any day now.
Currencies: The U.S. dollar gave up ground for the third session running. My target on the June contract remains a trade under 81.00. That should lead to an appreciation on all other crosses, but from where I stand, I do not see one clear standout. When weighing the risk, the two best bets are likely the cable and loonie.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
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