Commodity Update: Open To Economic Stimulus

For the last three sessions Crude has been back and forth in $2 trading range with prices closing near the top of that range yesterday. $84 appears to be the line in the sand in the August contract and I see resistance at $88. RBOB is trying to break out to the upside and on a successful push above $2.80 in the coming sessions expect $2.90 to be challenged. Heating oil gained 1.5% to trade back up to its 50 day MA. Prices have been below that pivot point since early April. I expect prices to push higher and have a first target in the August contract of $2.83. The 18 day MA held in natural gas helping price rally to close back above its 8 day MA. I remain in the bearish camp looking for August to challenge $2.50 in the coming weeks.

Stock Indices: The Dow lost ground closing under its 50 day MA for the first time in two weeks. The trend line has been breached that has held since early June as my inclination is for lower ground. As long as prices remain below 12700 I am bearish. The S&P closed just under to 20 day MA after bouncing off the 50 day MA in early dealings. As long as prices remain under 1350 I would be bearish with a target of 1300.

Metals: Gold prices continue to leak lower falling $60 in the last week. It appears prices should continue to trade lower as a challenge of the May lows could play out in the coming weeks. September silver is back above $27/ounce but I do to expect these levels to hold and still think a further depreciation is around the bend. As I’ve stated of late a close under $26/ounce should lead to a probe of $24.

Softs: Cocoa has maintained the 50 day MA for the last few sessions but that support should break and cocoa should resume its move lower. I feel a trade under 2200 is in the near future for the September contract. Sugar is overbought and in my eyes should move lower but we need to see some evidence so we can define our risk parameters. Ultimately a trade back near 21 cents is in the cards but from what level? Cotton cannot make up its mind but as gains fall off I think prices should be dragged lower. As long as prices remain under the 100 day MA at 73.25 in December I’m bearish. Aggressive traders can get short OJ with stops above the recent highs in my opinion.

Treasuries: 10-yr notes failed yesterday around the same levels prices rolled over in late May. Again this could be an interim top in the making but my stance is I’m neutral until prices break their 9 and 20 day MAs. 30-yr bonds also closed well off their highs but I’m waiting for confirmation there as well.

Livestock:  Albeit a small loss, live cattle have closed lower 5 out of the last 7 sessions. Prices appear destined for lower ground and a settlement below the 20 day MA in August at 118.00 yesterday should confirm that. Feeder cattle found support yesterday as lower lows were rejected. This may just be a bounce so let’s see if prices can remain under their 9 day MA; in August at 146.25. Lean hogs lost nearly 0.90% to close at a 2 week low to complete a 38.2% Fibonacci retracement. I expect lower trade and have a target of 89.00.

Grains: A wicked reversal in corn yesterday as the trading range was almost 70 cents so if your timing was a bit off it could have been costly. It is way too premature but a correction could play out. Do not misinterpret, I am not bearish and I know the weather forecasts remain blistering hot but folks, it's called futures and inclement weather has already been factored in. After a swift break, corn should be bought for a trade higher again but first I think we'll see a 50 cent drop. Soybeans appear to be having trouble holding on to gains, closing well off their highs the last 3 sessions. If November cannot overtake $15.50 this week I say we drop back under $14.50. Wheat is exhibiting the same signs of exhaustion as the other grains. Understand, prices have appreciated more than $2 bushel in the last 3 weeks. A 38.2% Fibonacci retracement puts December back near $7.75/bushel.

Currencies: The dollar is on the verge of trading above 84, a feat that has not happened in 2012. I anticipate a probe above 84.00 should lead to a trade near 86.00 in the coming weeks. The next days will be critical because if prices fail, an interim top is in. Stay tuned. International currencies look like they have further room to falter but this will all fall on the dollar in the short run. Momentum traders should look to sell a break lower and continue to trail stops in the European currencies. The yen looks like a coiled spring ready to make a sizable move but I’ve yet to make a decision on direction. Stay tuned.

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