Crude Oil To Wander, Is There A Bottom Yet To Gold?

could wander $2-3/barrel in either direction. I’ve advised clients to close out their August bearish trades and to trade July, trading both side of the market. Trade your bias in terms of direction via futures and then I’ve been buying $2 out of the money calls or puts as a hedge. Until that stops working that will be my strategy. I see July trade contained between $90-97 barrel in the coming weeks…trade accordingly. Until RBOB is able to get above its 18 day MA I am bearish, that pivot point is $2.83 in July. Heating oil has given up a dime in the last 3 days and on its lows traded under $2.82. Lower trade is likely if weakness persists in the energy complex expect a trade near $2.75. Natural gas continues to grind higher, fueled by a friendly inventory report today and chatter of $5 in the coming months. While I am friendly futures have advanced too much to open fresh positions. I’m bullish as long as July is above $4.15.

Stock Indices: Stocks closed lower for the second consecutive session, a feat that had not happened for the last month. If we can take anything away for the move in the Nikkei overnight a dramatic correction could happen. Please read my two most recent commodity charts of the day for a further explanation. I am targeting a move to 1550-1575 in the S&P and 14500/14700 in the Dow.

Metals: I am not willing to call a bottom in gold but I have priced out back ratio spreads in August and October and may make a move for some of my more aggressive clients. If we hold $1350 tomorrow I may take a stab...stay tuned. Chatter of $1000-1200 in the coming months has me leery of putting any real size on or for that matter even trading futures as one trader today referred to gold as a potential “waterfall.” The trader in me thinks we could get a short covering rally lifting futures back to $1475 so let’s see how the premiums look tomorrow. Silver is holding onto the $22 level but until we can take out the 9 day MA which has capped upside for several weeks it looks like a coin toss to me. After making a six week high yesterday copper appears to have rolled over off by 2.25% today and on the verge of breaking its 20 day MA. Additional 10-15 cents deprecation looks likely.

Softs: Any traders probing longs of late should have been stopped out in cocoa on a trade under 2275 at a small loss. Sugar is finding mild buying below 17 cents but let’s wait for more evidence before gaining any exposure. Cotton has lost nearly 6% in the last 4 sessions making its way to my 80 cent objective. It was only a meager 1.25% gain but coffee did register its first gain in the last 8 trading days. I think in the coming weeks by getting long at current levels you will look very smart. My suggestion remains bullish trade in September and December and starting to build a position.

Treasuries: Not sure how I missed it before but 30-yr bonds & 10-yr notes filled a gap in the chart today from 3/15. Now that we’ve done that do we trade north? My suggestion is to tighten stops on bearish trade as I think we could get a bounce from here. It would take a trade back above the 100 MA to confirm an interim low; those levels are 144’10 and 131’18 respectively. NOB spreads are on my radar buying 30-yr bonds /selling 10-yr notes. A doji star in the daily Eurodollar chart. I’ve advised clients in bearish trades to lighten up and be willing to fade the coming rally.

Livestock: Clients were advised to cut losses on their bullish live cattle trade. It amounted to a small loss as they lost on their futures and made on their option leg. I will be willing to re-explore longs on a trade back above the 9 day MA, in August at 119.60. Lean hogs are finding resistance near the upper end of the recent trading range as August futures have not been able to exceed 92.50 in the last 4 months. I do not have a good feel so thereof have no client exposure.

Grains: Corn has gained the last 4 sessions lifting futures back to their 50 day MA. A trade in new crop corn above $5.37 should lead to more buying interest as my next objective is $5.51/bushel. Old crop soybeans traded near $15.50 /bushel but closed out the session under $15/bushel. Today may mark an interim top…if that is the case I will look to sell rallies into next week with tight stops. There was nearly a 40 cent range in the old crop/new crop spread today which in May alone has widened more than a $1…not for the faint of heart. This is an example of trading spreads is no less risky than trading outrights and in some instances more risky. Soybean meal closed in the red for the first time in 6 sessions…close out any remain bullish trade. Wheat closed higher by 1.76% just above its 50 day MA. This leg should lift December futures north of $7.50/bushel…trade accordingly.

Currencies: Higher trade was rejected in the dollar index as futures retreated 0.78%. I’d like to see follow thru selling tomorrow but my stance remains the 20 day MA should be challenged in the not too distance future. The Swiss and Euro can be bought with tight stops. Lower trade was rejected in the Commodity currencies as the Aussie remains my vehicle of choice. Let’s assume overnight and interim low was established a 38.2% Fibonacci retracement gets futures very close to parity...which is my target in the coming weeks. The Yen gained 1.31% on the Nikkei swoon and you have the BOJ speaking tonight so this could be round 1. My suggestion remains inexpensive call options or nothing. A move back to $1.0200 could happen very easily in my opinion.

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