Commodity Update: Crude Oil Finishes 1% Higher

finished 1% higher on the day but did pare gains closing better than $2 off its highs. This that want to sleep better at night and do not want to be naked short WTI could put on a partial hedge by buying 1/2 of their position long Brent. On a spike higher this should protect and I still think the spread could work in your favor as well. It will take a close below $108/barrel in October to think the worse if over and an interim top is in. The products work higher as long as Crude is advancing but I do think we are in the 8th or 9th inning of this move. RBOB is higher by nearly 15 cents in the last 2 sessions but $3 has yet to be penetrated. On the 1.44% advance today heating oil posted a fresh 13’ high. For now the path of least resistance remains higher. Once we roll over I suspect we could see a volatile 15- 20 cent reduction in prices. Natural gas probed its 50 day MA trading above that pivot point for the first time since 5/29. I am looking for an additional 10-20 cent of appreciation which I would use as my exit window on remaining longs.

Stock Indices: The S&P held its own today managing a slight “W” closing just above its 100 day MA. I see the bounces limited and think there is another surge lower just around the bend dragging futures under 1600. The last two sessions the Dow has found support near 14740 with futures trading about $50 north of that level currently. Rallies should be muted as more selling looks likely very soon. Sentiment remains bearish as long as prices are under 15000.

Metals: Gold closed $16 off its highs…is this bull getting tired? The first level that needs to be broken is $1400 and then $1370… a trade under that level and I would be comfortable calling an interim top. Today’s chart of the day was silver where I outlined three separate bearish trade ideas. Silver closed lower by 1% on the day and closed 63 cents off its intra-day highs. I am operating under the influence that the 38.2% Fibonacci level just below $25/ounce will serve as resistance. A trade back to the 100 day MA drags futures lower by about $2.50…trade accordingly.

Softs: Cocoa gained 1.83% and some of my clients are in bearish trade. My suggested play is short futures and selling out of the money puts 1:1 as a hedge. I’m calling for a 5-8% reduction in pricing from current trade. I advised clients to use the last two days reduction in prices to buy 14’ contracts in sugar for longer term position trades. December coffee continues to find support $116/117 with futures rebounding off those levels to post a 1.5% gain today. Is this the beginning of the next leg higher? I’ve advised bullish trades in December futures with options protection; selling calls or buying puts.

Treasuries: After four positive days 30-yr bonds gave up some ground today probing its 20 day MA but holding that line on the close. A breach of that pivot point is followed by a trade to the 9 day MA. I still think we trade higher ahead of next month FOMC and get an opportunity to sell at higher levels. Inside day in 10-yr notes giving up most of the previous day’s gains. Futures failed at their 20 day MA the last two sessions but as of this post maintain trade above the 9 day MA. I think we grind higher in the coming weeks. Continue to build a bearish position in 16’ Eurodollars willing to sell from higher or lower levels thinking we will be much lower several months out. My favored play remains short futures and buying out of the money calls in 16’ contract 1:1.

Livestock: October live cattle continue to find support at the 20 day MA. I do think that level is breached as I am targeting a trade south of $125 in the coming weeks. Inside day in lean hogs with futures giving up 0.61%. Overnight futures are below their 9 and 20 day MA so expect follow through selling into tomorrow. To fill the gap from last week that puts October at $85.30.

Grains: If you want to know what is going to happen with grain prices turn on the weather channel in the Midwest. December corn gave up 1.13% today but held its 9 day MA on the lows. As long as future remains above the 18 day MA, currently at $4.68 sentiment remains bullish. A close above the 50 day MA is needed to get more buyers interested, that level is $4.88. Soybeans had a 25 cent trading range but closed virtually unchanged today. I do see higher trade but am not ruling out the gap underneath getting filled first. What I’m saying is we could trade 40 cents in either direction relatively easily so tread lightly. Wheat again failed at its 50 day MA ending lower by 0.64%. As long as the 18 day MA holds I would just view this as a correction in a bullish leg. That level is currently at $6.53.

Currencies: The dollar probed its 20 day MA closing just under that key pivot point. A close above 81.50 should lead to follow through lifting futures to the 50 day MA currently at 82.35. Today’s was day one of the descent in the Euro and Swiss that I’ve been forecasting. On a settlement below the 20 day MA look for the selling to intensify. The Pound probed it 20 day MA but pared losses.

Still yet I am expecting lower trade with an objective at $1.5345. In the last week we’ve seen a careful jump in the Brazilian Real erasing the previous week’s losses closing above the 20 day MA today. Expect more upside to come. This should be supportive to some of the soft and Ag markets where Brazil is a key producer/exporter.

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