Commodity Update: Crude Oil Loses 1.18%

lost 1.18% closing lower for the third session in a row but the bigger development is we closed under the 8 and 18 day MAs. Next support comes in near $103/barrel in September followed by $100. Those not wanting outright bearish plays in WTI could opt to be long Brent against short WTI 1:1. As expected as Crude oil works lower so should the products. RBOB on its lows touched the 50% Fib level trading within 1.25 cents off the 50 day MA. Under today’s lows the next support is eyed at the 61.8% Fib level just under $2.84. Heating oil closed lower by1.44%probing the $3/gallon level. The 50 day MA is my objective 4 cents under current trade followed by a trade near $2.90 in September. As I said in recent posts the 50 cent deprecation in natural gas futures the last 3 weeks looks overstretched and I think like a rubber band we snap back in the coming weeks. I’ve advised bullish back ratio spreads in October and November to clients.

Stock Indices: Today’s chart of the day was in the S&P. It is way too premature to confirm a correction is underway but we are seeing precautionary signs of an interim top. After settling above 1700 the S&P has stalled trading lower the last 2 sessions. A breach of 1675 in September futures would be followed by a trade back near 1650, my first objective and 38.2% Fibonacci retracement. The Dow closed down 0.50% trading just about 200 points off recent record highs. A settlement under 15400 should get futures moving towards the 50 day MA, currently at 15190, my first objective. The idea of putting on some downside protection should make sense for equity types especially if carrying open positions in a stock portfolio by way of securities or mutual funds that would likely trade lower with the overall market if futures were to correct.

Metals: Gold futures gave up 1.53% breaking under their 20 day MA which had served as support with futures above that pivot point since 7/12. I have been consistent in saying I expect lower trade and nothing has changed. My downside target for December futures are as follows: $1265, $1245 and I would not rule out a trade near $1200 though I would be lightening up on bearish positions on the way down. Silver is generally a bumpier ride than gold moving twice as much and today futures gave up 50% less on % basis off by 1%. September closed under the 20 day MA and lower trade is expected in this metal as well. I think we could lose $1/ounce with very little effort so those looking for bullish exposure be patient. Copper for the third day in a row has probed the 50 day MA ending in the same result under that key pivot point. A settlement above that level in September would get prices close to $3.30…will it happen?

Softs: Inside day in cocoa as futures stalled after yesterdays 3.19% jump. I see resistance just under 2400. It makes me nervous to jump in front of cocoa with bearish futures trades especially when weather is a key determining factor on pricing so I opted to buy inexpensive October put options with some clients. They were intrinsic last week and if we get a retracement the risk/reward dynamic makes good sense in my eyes. Sugar lost ground again and I am waiting for a lower entry, say 2-3% lower in 14’ contracts. OJ close lower by 1.51% at 3 weeks lows and has given up 7 cents in the last 2 weeks. I’ve suggested bearish positioning and will be looking to offset clients at a profit as I think we’ve seen about ½ of the anticipated move. This is a very fickle market so have your exit objectives and consider placing gtc orders to offset your open futures and options transactions. In November my objective is a trade under $135. Two steps forward and one step back on coffee as the 1.46% loss today cuts in half the appreciation in the two previous days. I think we are trying to find support levels and believe futures are close to finding that support. My suggested play is long December futures with some sort of options protection; buying puts or selling calls.

Treasuries: I do think we can get a bounce in the Treasury complex but for 30-yr bonds to move higher futures need to trade above their 9 and 20 day MAs; at 133’19 and 134’7 respectively. A decisive move above those levels not just a tick or two would get September futures moving towards 136’00 my target. Inside day in 10-yr notes trading less in less than a ten tick range and virtually unchanged on the day. Just above today’s highs lies resistance with my next level at 127’16. Continue to scale into bearish trade in 16’ Eurodollars. Those not wanting to be outright short or concerned about spikes in the coming weeks could opt to buy out of the money calls 1:1 against their futures.

Livestock: Live cattle are finding mild support at the 50% Fibonacci level in the last 3 sessions. On the highs the 9 day MA was hit, a close above that level gets this market turned around and likely headed back to its recent highs…trade accordingly. In full disclosure I am not positioned on either side of the market with clients and see far better opportunities elsewhere. October lean hogs have appreciated the last 4 sessions and are higher in the overnight market with futures approaching previous resistance. On the last two occasions trade near 87 cents was rejected…will this time be different? Those probing bearish trade should have tight stops above the highs made in June/July or could opt to buys calls against their short futures. The near 15 cent premium August carries to October still has me scratching my head if anyone can help please contact me directly.

Grains: It may not be a bottom in fact it is not even positive action yet but the last 2 days December corn has closed a nickel off its lows so we may be nearing a temporary price floor. I have been clear that I will not probe an upside will play until futures settle above their 9 day MA, currently 11 cents above settlements. We may miss the bottom but refrain from bottom picking as many thought $5/bushel was going to be the floor. I was briefly in that camp. November soybeans lost 1.35% to post a fresh low. Are futures traders eyeing the lows made last summer almost 30 cents under current trade? Like corn wait for a trade above the 9 day MA, currently at $12/bushel. If wanting to trade a soy product I’ve suggested soybean oil which I started trading for clients today. Instead of buying I like selling put options in December, you are synthetically long. Selling options has unlimited risk so this strategy is not for everyone. I do think establish bullish trades near current levels at 34 month lows and after 10% depreciation in the last 30 days there are worst trades. Wheat did see another green day higher by 0.76% closing 3 1/2 cents under its 9 day MA. That is the first hurdle I would like to see followed by retaking the 18 day MA, currently at $6.74 in December. If that happens I will explore re-establishing bullish trades for some Ag clients.

Currencies: The Euro and the Swiss were slight gainers but those probing bearish trade should still be in play with stops above the recent highs. Higher trade as rejected in the Pound but futures did maintain their 50 day MA trading ¼ cents above that pivot level. In terms of open positions with clients I like bearish trades and have clients in option trades in September with an objective at $1.5000 in the coming weeks. The commodity currencies have caught a bid the last 2 sessions with the Aussie nearly 1 ½ cents off recent lows and the Kiwi approaching 2 cents off recent lows. I expect that to be short lived if we get the commodity set back I’m anticipating in metals and energies. I prefer bearish trades the Loonie as well and as long as futures are below .9750 I am in the bear camp. The Yen gained 0.68% on the day and is higher by 0.33% overnight as of this post trading $1.0277. Prices are very close to breaking out for the descending triangle I have spoken to in my latest posts. A move out of this range likely established a higher leg and trade back to the June highs in my opinion.

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. 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 than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.