RCM Commodity Update: Gold Showing Signs Of Life?

A doji star on Crude oil’s daily chart. I’m not crazy on the positive action today and another close over the 8 day MA but if $96/97 continues to act as a ceiling we should see the downside I’ve been forecasting into next week. Aggressive clients remain short August futures with options protection. The trade that got away - the July “crack spread “ moved 5 cents in my direction, unfortunately I missed the trade. This relay urks me but it's part of trading. If we narrow back to 300-400 it is back on my radar, current trade 770. Natural gas popped 1.42% to gains for the first time in 5 sessions. Are we close to finding a value zone? If tomorrow proves that today was not just a fluke on perhaps a friendly inventory report I may shift from bearish to bullish…stay tuned.

Stock Indices: One word - HEDGE. The S&P dropped like a prom dress today closing on its lows just above the 50 day MA. A breach of the 50 day MA and 1600 physiological level would get us closer to my objective - the 100 day MA at 1565. The Dow too gave up better than 1% under 15000 and 263 point of its highs. A breach of 14930 should get June futures moving towards 14500…trade accordingly.

Metals: Is gold alive? Based on today’s 1% appreciation and settlement above the 20 day MA we may start to get some movement north. This is a very small victory for the bulls as prices have been in a $50 trading range for the last 4 weeks. The next hurdle is $1416 and with any luck a penetration of that level leads to $1450 and I can offset open August bullish trades for clients. Back to back inside days in silver is not extremely bullish. Since breaking under $22/ounce we’ve been unable to re-take that level. futures are 30 cents under that level as of this post…until that happens we tread water or move south in my opinion. If given an opportunity to buy overnight under $21, scale into longs.

Softs: The 0.59% advance in cocoa put futures above resistance levels mentioned in previous posts. Cocoa has gained for the last 8 consecutive days. I believe we are close to an inflection point but do not force the trade. My suggestion keep stops tight if in bearish trade. Sugar remains a dog down 2% so far in the month of June. On the 2.27% gain in cotton futures closed above 90 cents for the first time since 4/3. Bearish trade is on my radar being a contrarian but let’s see some evidence of an interim top. Do not rule out a probe of the March highs approximately 4.7% above today’s settlement. A bearish engulfing candle in OJ puts futures down better than 2% today. Aggressive traders can gain bearish exposure targeting a 38.2% Fibonacci retracement or 10 cent deprecation. Coffee dropped just shy of 4% dragging prices to their lowest levels since September 09’. In the last 5 weeks prices are off 20 cents - nearly 15%. What frustrated me today was I found no breaking news...the only conclusion stops are being run as I found no new developments. I will be forced to cut losses if coffee does not show more resiliency.

Treasuries: Treasuries were back in sell mode today giving back the previous day’s gains and some. The NOB spread softened the hit but still a negative day. 30-yr bonds need a trade above 140’00 by the weekend or my client’s days in this trade are numbered. To reiterate my stance from previous posts just as 30-yr bonds outpaced 10-yr notes 2:1 on the way down I expect that on the upside...the question is do we get the forecasted bounce? Still waiting for a rebound in the short end (Eurodollars) to sell a rally ahead of next week’s FOMC.

Livestock: Inside day in live cattle with a settlement at the 20 day MA. A trade above 120.50, the last 2 days resistance in August to see any meaningful follow through. An additional advance should be used as an exit window on remaining longs. 1% was the magic number today, pick a market that moved 1% and I was likely in with clients the wrong way. August lean hogs closed at fresh 4 month high approaching the February resistance level. Any higher trade we have two options take the loss or roll up our hedges. Currently we are short 92 puts, we may roll up to 96…stay tuned.

Grains: No surprises in today’s USDA report. Perhaps bullish data was priced in and on a neutral report some of that bullish sentiment was extracted with corn off 2.42%, soybeans declining 0.96% and wheat hit by 1.96%. December corn filled the Memorial Day gap. I advised clients to start scaling into bullish trade today. Two suggestions: sell $5.00 puts or get long via out right calls say $5.50 strikes. As for futures let the dust settle. Old crop soybeans closed positive while new crop gave up nearly 1%. My concern with clients is the August contract which gave up just better than a nickel, ending under its 9 day MA. I’m looking for 50 cent break in the coming weeks. Wheat closed at its lowest level in 3 weeks. A scale in buy near $7/bushel is a winning trade in my eyes as I consider $7.50 is possible in the coming weeks.

Currencies: The dollar index broke 81 settling at 4 month lows. The next few days will be critical to see if we rebound from oversold levels or we continue the leg lower…stay tuned. I continue to caution longs in European crosses, my stance we are very close to an inflection point. If $1.05 continues to cap upside into the weekend I should have bearish option trade ideas in the Yen…stay tuned. A trade above the 61.8% Fib level was rejected in the Loonie. On confirmation…a penetration of the 50 day MA traders should reverse and get short with stops above today’s high. A higher high and higher low in the Aussie is a step in the right direction but this cross continues to lag. .9400 should be the line in the sand under the market, as for upside a settlement above the 20 day MA at .9625 would give me some solace on bullish trades.

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.