Commodity Update:Turning Point

This past week was the first positive week in six weeks as Crude closed above $84/barrel after flirting with $80 all week. I think a base is being formed and we should start to see prices track north again into next week. $83 will need to hold on the downside and a settlement back over $86 should confirm an interim bottom. July RBOB held $2.65 but failed to get back above the 8 day MA on all attempts the last 3 sessions. I’d like to see that next week and then we should see a trade back near $2.90 in my opinion. Heating oil hung around the 50% retracement line on the weekly chart though we need to see progress higher next week. The further prices get above $2.63 the more comfortable I feel. If this week proves to be a turning point, the first leg should lift prices to $2.85. Natural gas finished lower for the third week in a row as prices reversed mid-week. The 8 day MA serves as resistance in this market as well. If prices wander back near their April lows I may probe longs with clients. Stay tuned.

Stock Indices: Just over a 50 point appreciation in the S&P and almost 500 points in the Dow on the week makes it a fairly positive showing. With a settlement back over the 20 day in the indices Friday, my take is prices make their way to their 50 day MA; in the S&P at 1355 and in the Dow at 12770.

Metals: Gold ended the week down roughly $35/ounce but the weekly range was nearly $90 so trade small until things calm down. I like gaining long exposure in August under $1600/ounce. At this point I cannot rule out another challenge of $1530 so trade accordingly. Albeit tiny, silver did close positive on the week for the fourth week running. As long as prices in July stay above $28/ounce I remain bullish. A settlement above $29.50 should lead to a trade closer to $32/ounce. I’m still looking for a dead cat bounce in copper but the last 48 market hours of action says otherwise. If $3.26 breaks in July look out below; My idea of a bounce would be proven wrong.

Softs: September cocoa is having trouble getting thru the 50 day MA but I think we have more left in the tank. My take is prices still have further appreciation to come. The 100 day MA at 2300 would be my target on longs. Potential flag and pennant on the daily sugar chart. If prices can get above the down sloping trend line that has capped upside in sugar since March next week my prediction of a gain in sugar should become a reality. My target in July is a trade back over 21 cents. Cotton was positive this week for the first time in 8 weeks. Prices appear poised in the December contract to trade up to at least 77 cents. Coffee is ugly but until we get a bounce I’m just not interested.

Treasuries: 30-yr bonds traded lower all 5 sessions this week and 10-yr notes were lower 4 out of 5. I cannot remember the last time that happened. The tide appears to be shifting and with a close below the 9 day MA for the last 3 sessions my take is traders should be scaling into bearish trades. Be willing to add to the position on a close below the 20 day MAs. In September 30-yr bonds, that level is 147’30 and in 10-yr notes at 133’00. My downside targets are 145’00 and 131’16 respectively.

Livestock: With three days of appreciation, live cattle are approaching resistance from 2 weeks ago. If prices can get above those highs, 122.00 in June should come into play. September feeder cattle should be on their way to their highs from 2 weeks ago and based on the slope I would not rule out a challenge of the March 1st highs. Aggressive traders could probe bearish trades in October lean hogs with stops above their recent highs. I think we see a 2.5-4% deprecation around the bend.

Grains: Corn is a buy as prices have put in an interim low and should see upside from here in my opinion. I prefer exposure in December contracts and could see a trade north of $6/bushel late this month into July. Traders can also work long into wheat but I would not give this trade as much room. If support gives way at $6.10 in July a challenge of the lows is likely, so place stops just under that support level. This week’s action erased three weeks of negative movement with soybeans up 5.5%. Aggressive traders can remain long if July stays above $13.80. I prefer soybean oil though, as the risk to reward dynamic is more favorable. I think your looking at a 2:1 risk:reward.

Currencies: The first negative week in 6 weeks has the US dollar in the red. However the 20 day MA did hold the last two market sessions. June will need to break 82.20 for extended downside. I do anticipate that, so other crosses can be bought. My favored long remains the Loonie. As for bearish trade, I think the yen still fits that part. My target in the yen is 1.2400 and in the Loonie at .9900.

Risk Disclaimer: The opinions contained herein are for general information only and are not intended to provide specific investment advice or recommendations and are not tailored to any specific’s investor’s needs or investment goals. 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 of your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results.