Commodity Update: Crude Oil Futures Advance Nearly 3%

Increased tensions in Syria have the bulls in the driver’s seat in Crude oil with futures advancing nearly 3% today. I am very close to reaching my pain threshold with client’s bearish trades. I will say looking at longer term weekly and monthly charts a trade above $110 will likely lead to a trade to $115/barrel so do not fall asleep at the wheel. It will take a settlement back below the 8 and 18 day MAs to think an interim top was in place, in October those levels are $106.45 and $105.80. RBOB traded to a fresh 13’ high picking up 2.76%. I cannot rule out a trade near $3/gallon but think any trade above that level would be short lived. Heating oil advanced 2.66% and on its highs traded within ticks of its February highs. Will $3.18 serve as resistance once again? Clients that I help manage have no long/short exposure in the products currently. Lower trade was rejected in natural gas with futures closing 8 cents off its lows just below the 50 day MA. A penetration of $3.58 and we should see a push to $3.70. If so look to exit your remaining back ratios spreads in October and November.

Stock Indices: The S&P closed lower by 1.57% at its lowest trade since 7/8 but the more significant development is a settlement under the 100 day MA. I believe this could set up a bigger retracement. From the 8/2 all time highs to date future have corrected 4.5%. My next objective is a probe of 1600 in September futures. The Dow gave up nearly 175 points today and has been under its 100 day MA for the last 6 days. Under current trade my next objective is a trade to the lows we experienced in June approximately 470 points from current trade. To date this correction has amounted to 5.4%.

Metals: Gold added 1.95% today lifting December futures nearly $25 above the $1400 level. On its highs futures were trading near the resistance level from June, 10 weeks ago. The ship is really starting to lean one way as we are approaching a $250 gain off the lows established in June. The sentiment remains bullish as long as we are above $1370, a break of that level would shift the sentiment to the bears. December silver gained 2.68% trading within 15 cents of its 38.2% Fibonacci level. A trade above $25 would quickly lead to a $26 trade in December futures in my opinion. On a trade under $23.50 expect a trade back near $21.50. My opinion is both metals have gotten ahead of themselves and overdue for a correction but I’ve been singing that tune for the last few sessions. Am I early of wrong?

Softs: Cocoa lost just better than 1% but remains above $2440. On a breach of that level expect more selling to emerge. My suggestion is bearish trade in December attempting to capitalize on a move to $2300 in the coming weeks. Sugar was capped again at the 50 day MA which has served as resistance the last two sessions. Continue to scale into bullish trade in 14’ contracts and use the near 1% set back today as a better entry. OJ failed at its 50 day MA today reversing course to close lower by 1.09%. It would appear lower trade is likely but I’m getting mixed signals. Until we get a clearer picture stand aside. Coffee lost 0.85% closed within a penny of its contract lows. We are at extremely oversold levels so I can think of worse commodities to scale into longs. I’ve advised those long December futures to have an options leg as a hedge either selling calls or buying puts.

Treasuries: 30-yr bonds gained better than 1 point and futures were lifted above their 20 day MA closing above that pivot point for the first time since 8/9. We are about 3 ½ points above the lows made 4 days ago and about 2/3 of the forecasted move by your truly has played out. My objective in September futures remains 135/136’00. 10-yr notes found support at its 9 day MA and found resistance at its 20 day MA closing just below that level. Overnight futures are above 125’24 and we should see follow through higher in the coming sessions. My upside objective remains 126’16/127. I’ve been looking to fade rallies in 16’ Eurodollars and on a further ascent I will start to work clients into more fresh bearish trades. Those not wanting naked short futures could opt to buy calls 1:1. Please contact me for clarifications.

Livestock: October live cattle have lost value the last four session closing at its 20 day MA today. I am looking for a move back near $125 - current trade $126.75. In the last 6 days lean hog futures have traded lower by 3 cents only to do an about face and then rally back 3 cents. From here it could go either way…stand aside.

Grains: Inside day in December corn with futures off by 2.85% closing just below the 50 day MA. To fill the gap formed yesterday it would take a trade to $4.74’4. As long as the 18 day MA holds at $4.68 bulls remain in the driver’s seat. Any bullish weather reports would lead to higher trade. I see resistance at $5.10 followed by $5.25. Higher trade was rejected in soybeans with November futures closing 40 cents off their intra-day highs. I do think we see higher trade but assume I’m wrong and we get a correction first. Expect the gap to be filled dragging prices to $13.31’4 and a 38.2% Fibonacci retracement puts this contract at $13.03. Wheat failed at its 50 day MA closing 7 cents off its highs on an inside day. As long as the 18 day MA holds at $6.54’4 the bulls remain I control. I’ve suggested in recent posts those trading futures should use options to hedge their exposure.

Currencies: For the fourth session running the greenback failed at its 20 day MA. I see little downside but am not ruling out a challenge of last week’s lows. Once we do close above the 20 day MA currently at 81.45 I think we find our way to the 50 day MA currently at 82.35. Those probing bearish plays in the Swiss and Euro should have stops just above the recent highs. 3 out of the last 4 days the Cable has lost ground. Today the 20 day MA was probed though losses were pared and we did close above that pivot point. I like bearish option trades targeting a move to the 50 day MA currently at $1.5345.If stocks continue to work lower one could take a stab at probing bullish trades in the Yen. Buy dips that hold support. On a risk off trade this currency should benefit in my opinion.

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.