Commodity Update: Crude Finishes The Week Higher

finished higher for the second week in row Friday, a feat not reached since the beginning of September. Prices closed out the week near their highs just about on the down sloping trend line mentioned in recent posts. I am calling for appreciation in the weeks to come targeting $90-92/barrel in the January contact. RBOB finished the week where it started but on the week the range was a dime. Upside resistance is seen at the 50% Fibonacci level just above Friday’s highs followed by $2.73/2.75. Expect a trade near those levels if Crude moves as forecast. Heating oil closed over its 8 day MA just under $3/gallon. I see solid support at $2.95 and anticipate a trade back near $3.10 in the coming weeks. The 18 day MA supported the last 2 days as natural gas ends the week on a strong note closing up by 2.17% and the highest weekly close in 3 weeks. I’m expecting a probe above $4 into next week.

Stock Indices: The S&P has closed lower 5 out of the last 6 weeks but selling could be drying up. We nearly completed a 61.8% retracement on the daily chart and came very close to a 38.2% retracement on the weekly chart. I will need more evidence next week on a shortened trading week but I am calling an interim low. My target is the 50 day MA just under 1425 in the coming weeks…trade accordingly. Selling was also rejected in the Dow Friday with prices closing 1.1% off their lows. As for upside resistance in December futures, 12725 followed by 12925 with my ultimate objective at 13200.

Metals: Gold may have lost its luster, down 5 out of the last 6 days, but in that time prices have only lost $15/ounce. $1720 should cap any advances as I am targeting $1680 into next week on December futures. Silver was able to pare losses the last few sessions but still closed lower on both days and down slightly on the week. I’m expecting prices to back off as I’m thinking we can trade under $31 before we see another leg higher resume.

Softs: The 3.42% loss in cocoa futures Friday erased the 2 previous days gains. Again a classic case of why traders should trail stops as I had just mentioned Thursday as to not get greedy. Prior to Friday’s correction, prices gained 7% the previous 4 sessions. I’ll be interested to see the price action when the 200 day MA is tested; in March at 2360. Mixed signasl in the weekly sugar chart. An inside candle and also a doji star. I continue to think scaling into longs just above 19 cents makes great sense, weighing the risk/reward dynamic. My favored play is back ratio spreads targeting 21 cents in the coming weeks. Cotton has appreciated 5 out of the last 6 sessions and should continue to track higher especially if stocks can catch a bid. My initial target in March was 73 but with some outside market help 75/76 may be obtainable. On a retracement next week I will be looking to gain bullish exposure in OJ with clients. Stay tuned. 7 consecutive losing weeks in coffee as prices bounced off 29 month lows Friday. I think we are very close to finding a value zone so I’ve advised March back ratio spreads and will be adding to the trade for clients once prices start cooperating. I expect a 7-10% apperception in the coming weeks.

Treasuries: 30-yr bonds remained above 152’0 to close higher on the week but if you notice prices could not hold on to their gains. I’m anticipating prices roll over and December makes its way back near 149’00 in the coming weeks. The 9 day MA currently is at 151’9 while the 20 day MA comes in at 149’18. 10-yr notes traded to their highest level in 3 months, but like 30 yr-bonds they are extremely overbought and I’m calling for deprecation immediately to follow. A trade under 133’00 in December is my call. Trade accordingly. The NOB spread is my favored vehicle of choice for bears in the complex.

Livestock: Live cattle picked up 0.50% to close at 3 week highs. A trade above $1.3050 and I think we would challenge the October highs just below $1.32. Feeder cattle moved in the same direction just at smaller % gain 0.31% as prices still remain under their 9 day MA. On further appreciation into next week my first target would be $1.4725. Aggressive traders could continue to pick a top on lean hogs but stops should be in place just above the latest highs. We still have yet to get confirmation that a trade lower as forecast will play out.

Grains: Bullish engulfing candle and a reversal in December corn Friday could signal an interim bottom. Close out bearish trades as I am reversing my stance and will be pricing out bullish trade next week. Soybeans lost 1.34% Friday, completing a 61.8% Fibonacci retracement to the penny. Longs are on my radar and on signs of buying interest I should have some bullish ideas into next week. A 38.2% retracement that took much longer than I anticipated was completed Friday with a probe of $8.30 in wheat. Do not rule out further selling to fill the gap mentioned in early July but if corn and beans find their footing we may see selling dry up. A market does not move straight down and Friday marks the seventh consecutive losing day…that will not continue.

Currencies: I did not see this coming and to me it just is a false breakout for now, but the dollar did surprise me Friday gaining 0.21% to put prices at 10 week highs. On that, traders may have been stopped on their long probes in the euro and Swiss. My suggestion is not to add or try again until the dollar in fact tops. Remain short the Aussie with stops just above the 20 day MA. Trail stops down in the yen to protect profits after the near 2.4% route in recent sessions.

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