Commodity Update: Crude Barely Positive

is barley positive but $2.60 off its lows. It is too early to call an interim low but buyers are testing the waters. I’ve yet to purchase options or gained bullish exposure via futures but selling put spreads under the market is on my radar. Lower trade was rejected in RBOB yesterday with prices higher by .50% as of this post. The support level from November may hold once again. $2.91 is the upside resistance in June futures. Heating oil is off its lows but still in the red. Those long heating oil out months should sell out of the money calls 1:1. Long RBOB/short heating oil is the trade. Natural gas traded under the 8 day MA but held on a closing basis. I feel we are close enough to the highs that we can nibble on bearish trade. For every short future sell an out of the money put 1:1. We could see a 30 cent break in my opinion.

Stock Indices: Inside day in the S&P with a gain of 1.64%. The 9 day MA remains the pivot point with trades on both sides yesterday. Large equity holders should be wary of a market that moves in one direction. I am not picking a top, just trying to say a partial hedge makes sense to me. After a near 300 point decline Monday the Dow’s has gotten back 65% in today’s action. The 9 day MA is your pivot point here as well. These levels come in at 1560 and 14560 respectively.

Metals: Gold poked its head out of the rabbit hole, gaining nearly 2% yesterday but my stance is we are just grasping for a deep breath before we dive lower again. This will not be a smooth ride either as seen in yesterday’s $80 plus range. Under $1350 I see support at $1250 in June. Silver traded as low as $22/ounce and as of this post is trading $23.65. Gold’s $80 range was $8000 per futures contract while silver's range was almost $10,000. Do not get sucked in on longs as a bottom is not yet determined from where I stand.

Softs: Cocoa hit my objective forecast weeks ago adding 2.27% yesterday and 13% since bottoming six weeks ago. The easy money has been made but as the dollar falls, expect further appreciation. Sugar appears to be putting in a rounding bottom and if the 9 day MA crosses the 20 day MA that will give cause for me to find a bullish strategy for clients again. A move north of 18.25 in May would likely confirm this. Cotton lost 1.16% to trade to seven week lows. 82 and then a trade under 80 could be in the cards for May futures. All trades above $1.50 have been rejected in OJ. For those willing to fade the recent rally I’ve advised shorting July futures and selling out of the money puts 1:1. A 38.2% Fibonacci retracement is approximately 15 cents off current trade. Coffee cannot make up its mind. Until we settle above the 20 day MA stand aside. I’m a buyer once that happens, in July at $138.75.

Treasuries: If and only if stocks track higher and Treasuries break under their 9 day MA, expect lower trade. Those long should have stops just under those pivot points in my opinion. In June 30-yr bonds at 147’8 and 132’27.0 in 10-yr notes. My favored play in this complex is the short end of the curve in longer dated Eurodollar trades. Because we are near contract highs, one could put on a trade with tight stops above fresh highs.

Livestock: Live cattle found buying yesterday able to lift prices 0.52%. A trade above $1.21 in June would intrigue me on bullish trade. Feeder cattle had its second positive day in the last 10 sessions closing just above $1.40. Not a true bottom yet but preliminary signs. Stay tuned. The entire livestock complex may be finding an interim low at the same time as lean hogs found buying interest as well. It will take a trade north of 90.30 to make me a believer in June pigs.

Grains: A bullish engulfing candle in corn yesterday as the 9 day MA remains the line in the sand. While I prefer new crop it appears we could get a bounce in the May and July contracts. New crop is my favored vehicle for those looking to position in bullish corn trades. The 9 day MA held in soybeans as well, lifting prices north of the 20 day MA. Until prices get above the 50 day MA at $14.20 in May, tread lightly. Support held in soybean meal as prices will finish 1.67% higher. My objective on the June contract is 409; the 50 day MA. Wheat recouped most of the previous day’s losses just managing to retake the 9 day MA. Until prices penetrate the down sloping trend line I would keep size very small. In full disclosure, most of my clients moved to the sidelines here.

Currencies: The big news in this complex yesterday was the breakdown in the US dollar, closing below the 50 day MA for the first time since early February. Do not rule out a trade under 81 in June futures. The euro and Swiss broke out to fresh highs. Trail stops if long. The pound has serious resistance at 1.5425, so limited upside is eyed. If commodities stabilize, expect the Aussie, loonie and kiwi to consolidate. My feeling is we may get another downdraft at least in the metals, so lower trade is projected. The Aussie and loonie are already below their key pivot point, the 20 day MA. Those short could have stops above that level. Bullish trade in the yen should only be played long call options.

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