Commodity Update: Follow The Buck

finished lower by 3.5% Friday but down less than 50 cents on the week. I see prices in August back and forth in a $5 range and outside of short term trading the waves I would not be looking for position trades until the picture becomes clearer in either direction. On the week RBOB will finish just shy of a dime higher closing just under the 50 day MA. Support is seen about 5 cents lower with resistance about 10 cents higher. Heating oil lost 2.2% Friday but was able to hold onto the 8 day MA. Prices appear to be rolling over and I expect a 7-10 cent loss into next week. Higher trade was rejected above $3 in Natural gas Friday as I expect Friday to serve as an interim top. With prices closing under the 8 day MA use the Fib levels as your targets on the way down.

Stock Indices: A slight disappointment on the jobs number Friday had stocks backpedaling from the opening bell. Stocks pared their losses but still lost 0.75-1.25% on the session and slightly lower on the week. I have a bearish bias but have no recommended trades at the moment. I would like to see a trade higher on light volumes as to establish bearish plays with clients from higher levels…stay tuned.

Metals: Gold cut through eh 50 day MA like a hot knife through butter losing 1.6% Friday closing near its lows on the week. The 50 day MA at $1600 in August should serve as resistance moving forward. If the dollar continues to strengthen expect $1550 to be challenged in the coming weeks. I hate to keep flip flopping back and forth but as long as gold remains range bound it will be tough to get traction in either direction. Depreciation scares me because if prices break $1535 I do not see solid support for another $100/ounce…stay tuned. Silver gave up 2.2% Friday and 4.3% in the last 2 sessions. I am bearish as long as prices remain under $28/ounce. If prices penetrate $26 do not rule out a probe of $24/ounce in the coming weeks.

Softs: Cocoa broke 3.25% Friday to trade back near its 100 day MA on the lows. A doji star in Thursday’s action will likely serve as an interim top. A 61.8% Fibonacci retracement on the move since the beginning of June puts the September contract back at 2175. October sugar got back most of yesterday’s losses closing back above the 100 day MA. As long as prices remain below 22.50 on a closing basis I am sticking to my guns that a correction is upon us. My target on shorts would be 21.90, 21.25, and 20.60. Cotton finished marginally lower on the week and while I have a hunch a pop is due I do not like the risk/reward so I have no trades on for clients. After hitting my upside targets advancing almost 40 cents high to low coffee prices have started to back off. September futures are 10 cents of their highs from yesterday. Aggressive traders can get short with stops above $1.81 with a downside target of $1.65.

Treasuries: 30-yr bonds and 10-yr notes traded higher closing above their 9 and 20 day MAs but the market remains so range bound it makes little sense to trade either direction in opinion. In time when equities and commodities start to falter which I feel is a few weeks away Treasuries will likely get bid to new highs and then we can get excited about shorting from elevated levels. Stay tuned for trading ideas but for now walk away.

Livestock:  I’m torn whether it is a flag and pennant on the daily live cattle or prices are rolling over. Because this and other mixed signals I have no opinion. My bias is lower only because outside market influence but I do not have enough conviction to trade either direction. Feeder cattle closed lower for the fourth week in a row near contract lows. I see little support and expect lower ground…trade accordingly. Lean hogs appear that they are headed lower but I would like to see confirmation such as a close below the 20 day MA to confirm; in August at 92.50. On that expect prices to trade under 90.00 in this contract.

Grains: December corn lost ground Friday for the first trading day in 10 dragging prices back under $7/bushel. Let’s assume prices are close to an interim top a 38.2% Fibonacci retracement would put December back at $6.30 so tread lightly on your longs. December wheat lost Friday just under 3% but putting things in perspective prices were still higher by 5% on the week. A correction lower in wheat would attract buying interest just above $7.70 in my opinion. Soybeans gave back the least Friday only down by 1.4% in November. While we’ve yet to see the ultimate highs I Ags and I think we can trade higher in the weeks to come I feel prices need to correct first. In November beans a 4-7% correction would do no damage to the bullish sentiment.

Currencies: The US dollar had 2 massive up days gaining 2% since celebrating our Independence mid-week. Though I disagree with the movement I will not fight it. A trade over 84.00 should lead to a trade bear 86.00 in the coming weeks. That being said most currencies and commodities have an inverse relationship so pay attention to the action in the greenback. All crosses with the exception of the Yen can be sold with tight stops as the dollar remains king for now.

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