Commodity Update: Crude Back To $87?

failed yesterday at the same resistance that has capped rallies the last 3 weeks, reversing mid day to close near its lows off 1.23% down. I anticipate lower trade into next week dragging prices back near $87 and if so I will tighten stops on shorts so as to not have the trade move against open positions for clients yet again. After printing afresh contract high in RBOB prices backed off to close virtually unchanged. I still am searching for confirmation when the correction will begin. If oil trades lower it should prevent wholesale prices trading north of $3/gallon. Heating oil gained 0.31% to close at 3 weeks highs. While we could move 5-8 cents higher I am sticking to my guns that this whole complex should see a correction very soon. The 8 day MA continues to support natural gas but the longer prices fail to re-take $3.50 the less likely it will happen on this leg. A correction of 25-40 cents is still my opinion.

Stock Indices: Four down days in a row yesterday as the S&P is fast approaching its 50 day MA at 1420. I anticipate more selling as my first target is the 38.2% Fib level at 1383. The Dow is also approaching its 50 day MA at 13215 on its way to the 38.2% Fib level at just under 12950. The trend lines that acted as support all summer should now act as resistance as the floor has now become the ceiling.

Metals: The correction in gold continues albeit at a snail’s pace with gold approaching a $40 correction with more in store. If $1750 gives ways I would expect a relatively quick probe to $1700 in December futures. After 3 losing days silver was able to claim a small victory gaining 12 cents yesterday. I expect lower trade ahead targeting a trade under $32.50 in December futures. Trade accordingly. Copper should continue to trade lower with the S&P. $3.60 is the target in December. Platinum was the chart of the day as we are in the first inning of a move that I think could drag futures 4-7% lower. The risk to reward dynamic is also attractive.

Softs: Cocoa gave up 1.86% to trade back near its 100 day MA closing just under its 50% Fib level. 2300 is my third and final target but make sure your trailing stops as after a 12% sell off this market could experience a violent bounce. Sugar lost nearly 1% closing under its 100 day MA for the first time since prices cleared that hurdle 1 week ago. Close out bullish trade and look to buy back in after a correction happens. I think March can be re-bought closer to 20 cents. The 100 day MA continues to cap upside in cotton…as long as that continues, remain in bearish trade but stops should be right above that level; currently at 72.40. Coffee lost 1.12% with lower trade 6 out of the last 7 sessions. I am still not ruling out a new contract low and would remain in bearish trade for now.

Treasuries: 30-yr bonds gained 0.51% to close just under their 9 day MA. Stops should be just above 149’00 in December so traders may be out at a loss very soon. If that happens we will likely get an opportunity to sell again from higher levels. 10-yr notes also challenged their 9 day MA closing yesterday just under that pivot point. Stops should be above 133’16 in December. As for NOB spreads a trade wider than -16.00 in December would suggest to get out of this trade at a loss.

Livestock: Live cattle failed at its 20 day MA closing slightly lower yesterday. If December fails to get above $1.27 I’d suspect we trade back down to the recent lows. Feeder cattle have been range bound going on 1 week so until the market decides on a direction I would stand aside. Lean hogs gained 1.69% closing above 78 cents so traders probing shorts should have been stopped at a small loss. Wait for signs of a top and I may suggest bearish probes again.

Grains: USDA report later today, so expect fireworks. I think it is possible we get a bullish number but I advised clients to lighten up ahead as there is mixed opinion on numbers for supply and demand. Corn lost 0.71% yesterday, closing lower 5 out of the last 8 sessions. Wait for today’s number. Support is seen at $7 with resistance at $7.70. Soybeans lost 1.73% dragging November to their lowest close in 3 months. $15.40 is your resistance while the next bearish leg should fill the gap from 7/3, 47 cents below the current price. It appears that we could get a bounce in wheat with prices closing higher the last 3 sessions. Do not expect much as prices have been range bound. I have a slightly bullish bias thinking we could see 25-40 cents in the coming weeks.

Currencies: The dollar failed to take out its 34 EMA finishing just above 80.00 in December. The 20 day MA at 79.60 that was resistance should now be support. The pound stalled yesterday but I think we see a trade under the 50 day MA yet. Stops can be tightened up just above their 34 EMA in my opinion. Cover bearish trade in the Aussie and replace it with bearish trade in the Loonie. The CAD is exhibiting more weakness and I like the chart pattern better. After we see a bounce in the Aussie I’d be prepared to give another short trade rec. Once again all shorts should be closed in the yen because of the recent action; trading above its 20 day MA.

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