Commodity Update: Bloodbath In The Metals Complex

gave up just under $3/barrel to close a hair above the 18 day MA yesterday. A 61.8% Fibonacci retracement puts May futures near $93. Bearish trade is the play, looking for a further depreciation ahead. RBOB lost more than 4% to close under the 100 day MA at 2 ½ month lows. I do not see solid support for another 10-15 cents. Tread lightly. Heating oil gave up the previous week of gains yesterday on the 2.77% swoon. Expect the recent lows to be challenged. The HO/RBOB spread continues to work but trail stops as it could snap back. Natural gas was down 3 out of the last 4 days probing the 18 day MA yesteray. This is a level that has supported since mid-February. A 50% Fib retracement puts May under $3.70.

Stock Indices: The S&P closed under the 9 day MA and challenged the up sloping trend line that has been in place for all of 2013. On confirmation, a trade lower is underway. 1495 should be the first stop, a 38.2% Fibonacci retracement. The Dow was $3 from losing 100 points and remains above its 9 day MA as of this post. That pivot point is 14435 on June futures. If bears grab the wheel, I could see 13870.

Metals: Bloodbath in the metals complex yesterday with gold getting clipped by 1.42% and $60/ounce in the last 2 weeks. The market is doing a great job of shaking out the weak longs but I am a buyer for speculative clients. Those that had previously bought are adding to their position. I started lifting option hedges on the 3 legged trades outlined in previous posts. Silver closed lower for the sixth consecutive session. It has been a bumpy ride but I like the risk/reward dynamic anywhere under $28/ounce. This is not for the faint of heart. The old adage is, silver takes the escalator up and the elevator down, and once again you see why.

Softs: Cocoa has backed up the last 2 days but the 20 day MA has supported to date. Can we hold that line in May at 2130? Sugar is off 10% in the last 3 weeks and though I do not see the Cafeteria giving sugar away for free…oh wait they already do. Expect lower trade. 90 cents continues to act as resistance in May cotton as some clients remain in bearish trade. Coffee gained 2.42% to close above the down sloping trend line. A trade back near $1.45 in May seems likely.

Treasuries: As long as securities move lower,Treasuries should catch a bid. I am eager to gain bearish exposure from higher levels in either 30-yr bonds or 10-yr notes. Late 2015 and early 2016 Eurodollars remain a sale in my eyes.

Livestock: Remain in bullish trade in live cattle as long as the 20 day MA holds…in June at 122.75. A potential triple top and perhaps an island top in the making in feeder cattle. Book profits in longs or tighten stops. Lean hogs are above 92 closing in the green the last 4 sessions. Bearish trades should have taken a small loss.

Grains: Corn can be bought with tight stops below the recent lows. The gap from last week’s USDA report should at least be partially filled in the coming weeks. Soybeans remain the laggard in this in sector closing under $1 the last 3 sessions. Lower trade looks likely. Not that I am advising bearish trade but I am not a buyer with clients just yet. Soybean meal is off 6% since I’ve advised bullish trade but all my clients long futures are partially hedged with options and I see limited downside from here, so stay the course. Today’s chart of the day was new crop wheat. Depending on the month, wheat gained 3-4% yesterday. I am calling an interim low and suggest wading into bullish trade calling for $8/bushel in December.

Currencies: The 20 day MA remains the magnet in the US dollar but I do feel a breach of that pivot point means we'll see lower trade…in June a trade to 81.50. ECM and BoE on the docket so be cautious. From 30,000 feet the euro looks like a buy and the pound like a sale but I have no client exposure. Forced into the market I would be a seller of the commodity currencies but I would on a position trade prefer to buy the Loonie and sell the Aussie 1:1. June yen futures settled above their 50 day MA for the first time in 2013…the only bullish trade remains long calls in my opinion. The Mexican peso is a sale with stops above the recent highs. Yes folks, it's a tradable currency with--believe it or not--more than twice the open interest of the Swiss and Kiwi (June futures) combined.

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