Commodity Update : August 29, 2013

As of this post, Crude oil is lower by 1.18% and $3.50 off Wednesday’s highs. On its lows futures were pennies above the 8 day MA which I view as your first pivot point. A settlement under $108 in October should confirm an interim top. If we trade south from here my objective would be the 50 day MA, currently at $103.35.Today’s trading range in RBOB was nearly 7/50 cents with futures closing down 1%. Unless Crude works highs it is doubtful we see the $3/gallon mark. Higher trade was rejected in heating oil with futures closing in the red for the first time in 3 sessions. A close below the 8 day MA is needed to confirm an interim op. That level is $3.1370 in October futures. Volatile action in natural gas today as it was inventory day. A bigger than expected injection today with the EIA reporting 67 BCF when the forecast was for 63 BCF. Futures closed above the 50 day MA on a bullish engulfing candle. 10-15 cents of additional upside is my call so hang until next week to achieve our target.

Stock Indices: The S&P finished higher for the second day running finding mild support at its 100 day MA, currently at 1632.Most of my clients that were in bearish trades have stayed the course as we see a probe of 1600 next week. The appreciation in the Dow was muted with futures gaining 0.19% today. Until futures reclaim 15000 I am in the bear camp.

Metals: Gold was a marginal loser today so bears should not claim a victory but I do think we could be in the first inning of a coming correction. Today’s chart of the day outlined a bearish scenario in gold while yesterday I did the same for silver. In both pieces I also outlined a few very specific trade ideas in futures and options. As for gold my first objective on bearish trades is the 100 day MA $47 under current trade. My ultimate objective is the 50% Fibonacci level and 50 day MA that both come in around the same level…$1310. Silver futures have lost ground the last 2 days and though we’ve only broken down 2.3% in that time frame I do think silver is setting up for a much larger downturn. I would not rule out 10-15% depreciation from current trade. Use the 100 and 50 day MAs as your objectives in this metal as well, currently at $21.95 followed by $20.65.

Softs: Inside day in cocoa with futures losing 0.76%. I continue to think bearish exposure getting in around the $2500 level is a great risk/reward scenario. It’s all about finding appropriate value and I think gaining bullish exposure in 14’ sugar near 17 cents also makes sense. This will likely be a trade that grinds higher and no quick hit but it merits your attention at these levels in my opinion. After yesterday’s 1.46% ascent coffee gave back a bit today dropping 0.68%. There appears to be a solid base built just below $117. My favored play is bullish exposure in December futures with options protection.

Treasuries: 30-yr bonds closed over 1 point off their lows and back above its 20 day MA. I think we see a grind towards 135/136’00. Support is seen at 132’16 followed by 132’1. 10-yr notes also experience an early morning reversal able to push futures into the green. Plat the breakout...the 20 day MA overhead at 125’19.5 and underneath the market the 9 day MA at 125’03. I am leaning towards a breakout to the upside and think a trade above 126’00 will get futures trending toward my target at 127’00. The short end of the curve remains my favored spot in the debt complex. Continue to scale into bearish trade in 16’ Eurodollars.

Livestock: For the last 5 days October live cattle have been treading water in a 1 cent trading range near $127. It could go either way in my opinion though forced into the market I would prefer bearish trade. Lean hogs rebounded off their 50% Fibonacci level and surged 1.48% higher trading to a one week high. Futures are rallying despite increasing supplies and pressure from the cash market. The futures market steep discount to cash prices should underpin futures. Seasonal demand will soon pick up so if not able to trade lower in spite of these headwinds stand aside or take the other side…I will be a spectator not a speculator.

Grains: Corn probed its 9 day MA but did hold that pivot point on the close. Sentiment should remain bullish as long as futures hold their 18 day MA, currently at $4.69. Soybeans were only a slight loser today though we did register a lower low and lower high…both bearish signs. I suspect we get a higher trade but as I’ve said of late I cannot rule out filling the gap underneath the market prior to additional upside. Pay attention to the weather and allow that to guide you. Tread lightly as a 40-60 cent move could happen in either direction. Wheat traded lower for the third session in a row probing its 9 and 18 day MAs today but holding those pivot points on settlement. A close under $6.50 likely means we revisit the recent lows. I have clients long futures...not so good however because they instituted hedges by selling calls and buying puts (collar) they are feeling very little pain.

Currencies: The buck found support at its 20 day MA today and closed above its 34 EMA. On its highs we traded a few ticks below the 50 day MA. I am looking for an additional 1.5-2.5% appreciation. In recent posts I’ve advised bearish exposure in three currencies; the Pound, Swiss Franc and Euro. All three plays should be profitable…trail stops and milk the trade. I had expected the Yen to rally and that has not happened. On a breach of the 50 day MA, currently at $1.0140 walk away and cut losses.

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.