RCM Commodity Update: Crude Oil Trading To Its Lowest Level In 3 Weeks

lost 1.41% closing lower for the third session in a row trading to its lowest level since 7/9. As long as the 8 day MA caps upside expect a grind lower that could drag futures under $100/barrel. My favored play is short WTI/long Brent though I do not mind outright shorts in WTI though I advised clients to put on partial option hedges today either selling October puts or buying September calls into tomorrow’s FOMC and inventory #. I think products works lower alongside Crude but I did not want to hold an open profit in the crack spread into tomorrow so I opted to book profits...just under 2 cents per spread for clients. I will look to reestablish the trade if we trade closer to 100 premium to heating oil. Natural gas made a fresh low losing 1.15% but after greater than a 30 cent loss in the last 5 days I think much of the damage is done. On signs of an interim low I will be looking for bullish trade…stay tuned.

Stock Indices: Securities remained range bound with the S&P probing its highs gaining 2.25 points on the session. A settlement above 1700 would confirm the next leg upward is under way while a close under 1675 would confirm the correction I’ve been hinting at. Tomorrow’s Fed decision should determine where from here. The Dow continues to run into stiff resistance around 15500…will that continue? A breach of 15350 would likely get a correction underway. Lightening up on longs ahead of the Fed or instituting hedges is advisable.

Metals: In recent posts I think I’ve been confusing the 20 day MA with the 50 day MA in gold…sorry for the confusion. The 50 day MA has been the pivot point that has served as a magnet for the last 7 sessions. In terms of determining the next leg a trade above $1345 tomorrow or below $1310 would determine the direction from here. My bias is leaning slightly negative. Silver probed its 20 day MA trading under that level for the first time since 7/19 but as of the close prices recovered ending just above that level. Under current trade I see support at $19.25 followed by $19 and I am not ruling out a challenge of the lows established 6/28. My interest lies in buying metals for clients from lower levels.

Softs: Cocoa found support at its 20 day MA...a level futures have been above since 7/11. Lower trade could still play out yet as I am advising bearish trades to hold out for a bit more. My objective is an additional 2% depreciation. Albeit 1 tic sugar managed to close in the green again today… in 2 weeks futures have advanced just under1 penny but how much is left in the tank? I’m looking to buy dips that hold the 20 day MA in 14’ contracts for fresh entries. Today marks the 10th day OJ has been contained in a 5 cent trading range just above its 50 day MA. I’m looking for a confirmation but I think we are overdone for a correction. In full disclosure I have no client exposure here. Coffee has given up ground 4 out of the last 5 sessions maintaining trade just north of $120. We must retake the 20 day MA to see buyers emerge...that level in September is $123.30. My preferred trade here is long December futures with an options hedge.

Treasuries: Action moving forward will be determined by if we taper from here and its timing. Higher trade was rejected at the 20 day MA in 30-yr bonds. As long as futures are under their 9 and 20 day MA I am in the bear camp. 10-yr notes are stuck between those two pivot points like a ping pong ball back and forth in the last 3 sessions. A breakout above or below will determine the next leg…my bias is lower. Eurodollars have been flat going one a week after the rebound from early July. I’ve been fairly consistent saying I like bearish trade in 16’ contracts. Those with a sizable futures position could buy calls against their futures this week as a way to lighten up on the FOMC and NFP.

Livestock: Lean hogs have broken down 4 days in a row...a feat that had not been accomplished since mid-March when prices were nearly 9% lower. August challenged the up sloping trend line that has supported since mid-May. A 50% retracement puts futures in August under 95 cents and would serve as my exit objective. Fresh bearish entries should be playing October which has lost 3.5% the last 4 days. I’ve advised traders to have an objective of 82 on this contract.

Grains: Say it is not so green on the screen in corn closing positive for the first time in 7 sessions. As I hinted at yesterday I think we could get a bounce from over stretched levels. I’m looking for a trade north of $5/bushel that would set up a fresh sell signal. The 50 day MA comes in at $5.18 and I do not expect a penetration of that level especially with so many farmers yet to sell their crop. A lower high and lower low in November soybeans trading to their lowest levels since 5/10. Do not rule out a challenge of the April lows being we are less than 20 cents away. Increased farmer selling could get futures there in a hurry but I think farmers would be better served to sell a 40-60 cent bounce. Wheat gained for the third session in a row closing just above the 9 day MA. Intra-day futures traded within pennies of the 18 day MA. Wheat remains my favorite Ag commodity to be long as I think prices could see an immediate 25-35 cent gain.

Currencies: The dollar probed 82 for the first time this week finishing slightly higher. This could be the first inning of the ascent I’ve been calling for. 83/83.50 is my upside objective. The Euro and Swiss did not really move lower as anticipated but the Pound did and that is the cross I acted on with clients and also it was featured as today’s chart of the day. Even a blind squirrel can sometimes find a nut...today the Pound was lower by 0.74%. A trade below the 20 day MA should get my clients close to their profit objectives. It would be great to book a profit ahead of the BoE Thursday. In terms of recent trade recs I also advised bullish trade in the Yen and bearish trade in the Loonie. The Loonie gave up 0.52% today n the Yen was slightly lower today but higher by 2.4% in the last 4 days. Today with the Aussie hit by 1.50% I am thankful I am no longer trading here with clients. Do not rule out lower trade with more weakness in the energies and metals if that plays out.

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. 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 than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.