Commodities Update: Waiting For Friday's U.S. Jobs Number

Inside day in Crude oil closing lower by nearly 1%. This is not bullish. At the close, back under the 40 day MA, in June at $105.25. Aggressive traders could initiate shorts again. It seems like I’m jumping back and forth, but my friend that is the market. I advised some clients yesterday to get short July futures and sell out of the money puts against 1:1. June RBOB tested and held the 100 day MA but if $3.06 gives way I would anticipate a trade under $3, a level not seen since early February. Heating oil has lost ground the last four sessions, closing yesterday under the 18 day MA. I’m expecting a trade down to the 100 day MA in June at $3.0945. If we see prices totally collapse I’ll advise hedgers to roll their options down. Stay tuned. Upside resistance was met at the 38.2% Fibonacci level in natural gas. A breach of the 40 day MA yesterday. Traders should cut their exposure in half and exit the remaining longs back under the 18 day MA. That is if they're willing to give up 12-14 cents and still make the trade profitable. That would be my suggestion.
 
Metals: Big candle in copper with prices failing to hold their short term MAs. If you rode the rally I would move to the sidelines. I’m not advocating reversing, but rather book profits on longs. June gold is $20 off its recent high trading back near $1650 yesterday. I see resistance at $1670 with support at $1630. Silver gave up the ghost, losing ground for the third session in a row approaching $30.50 again in July. If $31 is able to cap gains into the weekend we should see $29 in short order.
 
Softs: July sugar is approaching 20 cents/lb. I have advised traders to either book profits on shorts or trail stops because--like a rubber band stretching--I think we get a snap-back in price very soon. On the weekly continuation chart there seems to be solid support around 20 cents. If I’m wrong and the current glut breaches that level, 15 cents could be the next level so do not rush a buy just yet. The 50 day MA in July coffee needs to be cleared at $1.8275 first but next stop on a trade above that level is the down sloping trend line at $1.90 in my opinion. I have bearish trades on my radar in futures and options closer to that level with clients.
 
Livestock: Live cattle lost ground yesterday but as long as the recent lows hold, traders could have a small long position at these levels weighing the risk-to-reward. Same story with feeder cattle; as long as $1.48 holds on a closing basis I am mildly friendly the May contract. Lean hogs were lower by 1.6% yesterday making fresh lows and taking prices to levels not seen since January 2011. This pig is trading like a dog and likely has more room to fall.
 
Grains: Finally the break I’ve been calling for in grains with corn notching a loss of 2.8%, wheat lower by 4.4% and soybeans 1.25%. Corn and wheat under $6 would put buys back on my radar but let’s see how low this break can take prices. There is no rush, as I have until the end of June which is the point at which I want to be long, going into the USDA  numbers. If July corn breaks $6/bushel with conviction we may have an opportunity to buy near $5.70. As for wheat, if $6 gives way, $5.65 comes to mind. That's a level that has held twice in the last five months. Medium term traders could look to the soybean spread, buying November and selling July to play a potential break in grains prices.

Stock Indices: Stocks have halted in their tracks in anticipation of Friday’s jobs number. You know my take, I say prices are unsustainable at these levels but I’m on the sidelines with clients. I would be willing to wade back into bearish plays on a break lower. The S&P closing back near 1365 and the Dow near 12900 would be confirmation for me.

Treasuries: 30-yr bonds and 10-yr notes gained yesterday recouping the previous day’s losses. For outrights I would not have bearish exposure. As for the NOB spread, yesterday saw the loss of 17 ticks from Tuesday which is just over $500 per spread. Traders with tight stops may have been stopped out. I would like both instruments to settle under their 20 day MA to initiate this trade as opposed to just 30-yr bonds like we saw Tuesday.
 
Currencies:  Day three of the dollar appreciation and albeit a dead cat bounce the next test should be the 20 day MA at 79.55 in June. All other crosses with the exception of the yen look poised for lower trade. The Pound settled below 1.6200 so longs should be peeling off their exposure. Aggressive traders could have small size short crosses expecting the dollar to gain but I will be in cash with clients into next week.
 
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