Commodity Update

closed lower by 2.83% erasing yesterday’s gains closing just below its 8 day MA. Depending on stop placement you may have been taken out of outright futures. Some of my clients that got out yesterday got back in longs today as we think the recent lows will hold. Those that have short calls against their futures should stay the course in my opinion. RBOBs daily range was nearly 9 cents with prices closing down about half that level just under its 50 day MA. A trade above $2.75 or below $2.65 should signal the direction of the next leg. Inside day in heating oil with a close lower by 1.14% under its 38.2% Fib level. If the 18 day MA holds at $3.0150 in January expect prices to grind higher…if not back to the sidelines. I zigged while I should’ve zagged as natural gas gained 2.79% to close at the upper end of the recent trading range. My stance is we need a correction before much more appreciation…trade accordingly. As for shorts you should be pennies away from getting stopped at a loss.

Stock Indices: The S&P gained for the third session in a row lifting prices 3.4% above the recent lows. A 50% Fibonacci retracement puts December futures at 1405 while a 61.8% retracement at 1418. Support is seen at the 9 day MA at 1371. Within the same time frame the Dow has climbed 325 points lifting prices back above its 9 day MA. As for upside targets I think we even get close if not retake 13000 on this leg.

Metals: Gold futures lost just better than $10 on an inside day. Aggressive traders can gain light bearish exposure as long as prices remain under their 50 day MA; currently at $1743. Do not rule out a trade back to the 100 day MA; currently at $1688. Silver ran into resistance at its 50 day MA closing lower by 0.78%. I want to be bullish but I refrain until the 50 day MA is penetrated…ideally we can get long from lower levels. Aggressive traders can gain light bearish exposure here targeting a move under $32 into next week.

Softs: Cocoa future gained 1.45% and should continue to be bid higher if the dollar fails. Sugar did not follow through after the 4.13% appreciation yesterday. Remain in bullish trade as higher ground should be around the bend. 20.50-21 cents remains my target. Cotton futures appear to be stalling but I am mildly friendly as long as the 9 day MA supports; in March currently at 71.50. I was not quick enough to jump on the most recent correction in OJ hopefully some of you were...today prices gained 4.23% to put prices at 2 month highs. Coffee lost 3.14% as yesterday for now looks like a false start. My conviction remains on bullish trade as I think coffee should be accumulated at this devalued price. Buy and hold as I am shooting for $1.65 in the coming weeks.

Treasuries: 30-yr bonds gave up 0.60% as prices continue to trade down as forecast. The next critical support comes in at the 20 day MA at 150’2. Some of my clients have lightened up as I will be out several days in the next week for the holidays. For traders with a longer time frame I like the idea of fading rallies as a major top may be in…stay tuned. The sentiment in 10-yr notes also appears to be shifting hands as move to its 20 day at 133’11 should play out very soon in my opinion. My suggestion is at some capacity…futures, options or spreads to gain bearish exposure in this complex.

Livestock: Inside day in live cattle as resistance remains at $130.70 in February. I suspect we get a probe higher but have no current exposure with clients. January feeder cattle have gained ground the last 4 sessions as prices are trading just above their 9 day MA and below their 20 day MA. Forced into the market I would nibble at bullish trade. Lean hogs continue to grind higher though I think the party is almost over. I will be looking for a bearish entry on any sign of a reversal…stay tuned.

Grains: March corn closed at a 1 week high picking up 0.64% penetrating the down sloping trend line…see today’s chart. I’ve advised gaining bullish exposure thinking prices will find their way to $7.65 followed by $7.80 in the coming weeks. A bullish engulfing candle in soybeans today with January gaining 1.29% to close just below the 9 day MA. Traders that are not already long corn could buy soybeans though I see there little need to be long both as they should move in the same direction. In terms of the fundamental picture I think there is a more compelling case to own corn all things considered south of the border. Wheat should also benefit with the overall appreciation I expect in the grain complex. Today March gained for the second day running which is an impressive feat after 7 losing days. My target in March is $8.75 followed by $8.90.

Currencies: I continue to think the dollar breaks down in the coming weeks though it will take a trade under the 20 day MA for me to get confirmation as opposed to just my gut feeling. I am targeting a trade under 80 in the coming weeks. Traders can continue to scale lightly into bullish trade in the Euro, Swiss and Pound adding to the trade as profits increase…trail stops. The best looking play in my opinion is the Cable…objective 1.6100. The 20 day MA held in the Loonie on a slight loss today. Bullish trade is advised targeting a trade north of 1.0100. As long as equities are in favor the Yen moves lower. Today losing 0.43% dragging prices to 7 month lows and more selling appears likely.

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