Commodity Update: Crude Trading Lower

The slope is not dramatic but it does look like prices are starting to trade lower in Crude oil, with October now just better than $3 off recent highs. As I’ve said repeatedly if prices can breach $94 we should see prices under $90 and on that I would start lightening up on bearish trades. RBOB once again traded below but closed above the 8 day MA. I’d expect a break lower on the third attempt in the next few sessions. A 38.2% Fibonacci retracement puts October near $2.70. Heating oil closed nearly unchanged but I’m still looking for a break lower, target $2.90 in October. Natural gas gained just better than 2% but it’s too early to call an interim bottom. Shorts should however trail stops if still in the trade to not give back too much profit.

Stock Indices: My take: the longer it takes stocks to make new highs the less likely new highs will be made. It looks like we are in a holding pattern in anticipation of Jackson Hole. It will take a trade under the trend line for confirmation of downside but that is my opinion of where we are headed.

Metals: December gold futures stalled around the $1675 level and though they held the 200 day MA don’t rule out a correction short term. Prices could get back near $1600/ounce but as long as prices stay above the trend line just below that pivot point I would remain bullish longer term. Silver closed lower for the first time in nine sessions albeit a tiny amount. Support is seen at $30.50 followed by $29 in December. As long as this contract remains above $28/ounce I’m friendly.

Softs: Cocoa will eventually come down and fill the gap formed earlier this week so it is a candidate for a short entry but do not jump in front of this train. Wait for a reason to get short. Sugar gave back nearly 2% yesterday after the 3% gain Tuesday but I am ok with this action because one should expect volatility on a trend reversal which I think this will prove to be. Stay in bullish trade as long as the June lows hold. Cotton closed back above its 100 day MA but remain in short trades with stops just above the recent highs. That represents about an additional $500 risk per contract. A 50% retracement from the move since late July puts December coffee back near $1.75, just above the 100 day MA as previous posts suggest. Trade accordingly.

Treasuries: Treasuries lost ground yesterday for the first time in 10 days with both 10-yr notes and 30-yr bonds slight losers. I see support at the 20 day MA and as long as we remain above that level I suspect a grind higher is in the cards. In the September contract that pivot point is as follows in 10-yr notes at 133’14 and 148’4 in 30-yr bonds.

Livestock: Live cattle surged 1.4% to recoup the previous week’s losses closing back within 1.25% of 6 month highs. Aggressive traders can scale back into bullish plays with stops under $123.00 on the October contract in my opinion. Feeder cattle content to dance just above their 9 day MA but I see no reason to have any exposure at the moment. Lean hogs have gained the last 3 session and did manage a trade above its 9 day MA for the first time in one week. Aggressive traders can work back into bullish trades. My suggestion would be to get long futures while simultaneously selling out of the money calls 1:1.

Grains: Corn gained 2.25% positive for the first time in six days. I still like the idea of gaining bearish exposure at what I perceive to be inflated prices. Risk to new highs which equates to approximately a $2000 move in the futures market with a target of roughly $5,000…this is of course per contract. Also one could use an options play or partial hedge with options. Soybeans jumped 1.8% to register its highest close as prices may attempt a run at $18/bushel. Being short beans is the only Ag that scares me currently. Wait for a settlement below the 9 day MA which has supported in the November contract the last two sessions. A close under $17 in November should lead to a trade under $16. Wheat gained 3.5% to lift price back over $9/bushel. Take a loss on shorts.

Currencies: The Aussie dollar remains the weakest link as prices have lost 2.5% in the last 3 weeks and look to be on the verge of trading below the 50 day MA for the first time since mid-June. I don’t see any clear signals in the other crosses and would wait for Jackson Hole to come and go before imitating fresh trades.

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