Commodities Wrap: Crude on the Move

A positive jobs number and things heating up in Iran and Crude is back on the move advancing 1.5% Friday. We may see a bounce but until we see a trade back over $99 I still am thinking prices have more downward pressure.

My target in March is  a trade closer to $93-94 in the coming weeks. What is disturbing though is the disparity between the Crude daily chart and the distillates as Crude is on the lower end of the recent trading range while heating oil and RBOB are breaking out to new highs. It is a classic case of the tail wagging the dog. My sense is all products should trade lower in the coming weeks but time will tell.

Natural gas is cheap but with the absence of two major events--either extremely cold weather or a significant shut down on production--there is no catalyst for prices to move higher. Look elsewhere.

Job growth and lower unemployment rates  had stocks off to the races Friday, with equities at fresh 2012 highs up near 5% ytd.  Stocks will likely forge their way to higher territory. I am back in the longs camp and think it makes sense as long as the 9 day MA holds. That pivot point comes in the S&P at 1318 and in the Dow 12655.

Gold and silver in my estimation made an interim top this past week and we should see a correction in the short run. Gold lost 1.8%, with the June contract giving back most of the week’s gains Friday. I would expect a further $50-75 correction in the weeks to come.  A 50% Fibonacci retracement from the current leg puts prices back at $1650.

Silver was able to hold on to most of the week’s gains but still registered a 1.6% loss Friday. A correction here would likely drag March futures back near $31/ounce.

Nothing new to report in forex as I am still expecting a bounce in the dollar and for the other crosses to back off. In full disclosure I have no recommended plays until we find a top in foreign currencies.

OJ continues to slide as prices have lost ground eight of the last nine sessions…expect that to continue. I like the move in cocoa bouncing off the  50 day MA, but the inverse relationship it generally exhibits to the dollar has me holding off on new purchases. Still, you should have this commodity on your radar in case the dollar moves south as opposed to north as I expect.

Based on the market’s assumption that sometime in the next year we may see rates increase, Treasuries got hit hard Friday with 30-yr bonds depreciating 1.5%. Aggressive traders can fade rallies in 30-yr bonds and 10-yr notes with stops just above their 20 day MAs. Those levels are 143’11 and 131’06 respectively in the March contracts.

Friday in the AG musical chairs market, corn and wheat were in flight while soybeans advanced 1.27%. We could see prices grind higher but I prefer to be on the sidelines with customers if and when they get stopped out of the longs that they should be trailing. A leg lower could be bought but I would like to see a correction before initiating new positions.

Expect further downside in live cattle as Friday, prices gave up 1.2%. A 50% Fibonacci retracement in April puts prices to 125.70 while 61.8% drags prices to 124.75. Lean hogs are a buy on dips that hold the 20 day MA; in April at 88.35.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.