Commodity Update: Crude Bounces Off 100 DMA

April Crude oil bounced off its 100 day MA and is trading near its highs on the session as of this post. A trade above $93.50 should lead to further upside with the 50 day MA coming into play. I’m suggesting bullish exposure to play a trade $1.50-2.50 higher from current levels. RBOB has held the 50 day MA on every attempt in the last 2 weeks including multiple attempts the last 3 sessions. Prices could go either way from here...I suggest playing a trade above $3.15 or below $3.08…which would determine the direction of the next leg. My bias is higher but clients currently have no exposure. Heating oil futures are finding mild support just above their 50% Fibonacci level; in April at $2.90. I see support at that pivot point followed by $2.82. A surprise in the AGA inventory report today put natural gas higher by better than 4% and prices at 3½ month highs. Some clients are in bearish trade short $3.50 calls. Today was painful as they are effectively short futures. They have 12 days to see prices retrace as I believe they will. No I’m not bearish but after a 70 cent appreciation a correction should play out.

Stock Indices: The grind higher continues with the S&P posting a 0.40% gain. Prices have been above the 9 day MA for the last 10 trading days and climbed 3.6% in that time frame. Prices trend higher unit they don’t…my thought has been for weeks we are overdone but I’ve been wrong. I’m recommending the sidelines or to be hedged via owning put options if still in with any size in the stock market. As for picking a top I’ve abandoned that play with spec clients. Twelve out of the last thirteen sessions we’ve been in the green as the Dow is within 500 points of 15,000. We’ve climbed 750 points in the last 2 weeks and 125% off the lows in 2009…unreal people. At this pace we’re on our way to 30,000 in the next couple of years…yeah right. I would rather miss the top then be there holding the bag when the music stops.

Metals: Gold closed marginally higher but well off its lows, settling at $1590 in April after trading at $1575/ounce in early dealings. I view the recent action as a coiled spring that will pop higher in the coming weeks. I maintain that $1560/1570 should support and have an upside objective $1625 followed by $1650 in April. Silver is lower the last 2 sessions but again is finding vale just above $28.50. Looking at a longer term price chart back to early 2011 this level has served as a pivot point so I think it would take a significant event to breach these levels. Furthermore if the dollar was to back off I think that would be constructive for this complex.

Softs: Cocoa prices have closed in the red the last 2 sessions but did hold the 20 day MA today. We are still $100 off the lows last week and in my eyes taking a breath before we see further upside. In May futures I’m still targeting 2250…trade accordingly. Sugar bounced off the 9 day MA able to recover off the previous 2 days of losses. Unless prices take out 19 cents in the next few sessions I am sticking to my guns that we retrace back near 18.25 in May. Cotton surged 2.5% today to propel prices to 11 month highs above 90 cents. Much of the recent move is from increased buying from China but when will the hoarding end? A near 30% appreciation should discourage this but I may be speaking my position as I have some clients in bearish trade. We are very close to taking the loss…stay tuned. Coffee futures have closed lower the last 4 sessions dragging prices to 3 week lows. I expect to find buying inertest just under current trade. My objective remains a trade closer to $1.50 in the next 3-4 weeks.

Treasuries: 30-yr bonds have tread water the last 4 sessions as 140’16 appears to be the line in the sand in the June contract. From here I think prices find their way back above 143’00. 10-yr notes are finding mild support just above 130’00 closing at the 38.2% Fibonacci level today. I see a trade north of 131’00 and would not rule out a probe of 132’00. Lighten up on late dated bearish Euro-dollar plays and be willing to work your way back into the trade from higher levels.

Livestock: Live cattle have met resistance at their 9 and 20 day MAs just above current prices. If the recent lows hold on a closing basis aggressive traders can probe bullish trade. Truly to get confirmation we need consecutive settlements above those key pivot points; in April at 128.40 and 128.90 respectively. Higher trade was rejected in May feeder cattle with the lowest trade in 7 months today. Look out below if the sellers want to take control. We’re seeing mixed results in June lean hogs of late but I feel we are close to turning higher. I would be comfortable with a small bullish trade willing to add if the market proves me right. My suggestion is long June futures while selling out of the money calls 1:1.

Grains: May corn futures closed higher by 0.88% but have been unable to take out the 61.8 Fib level the last 3 days. May futures will need to take out $7.20 to see the bullish momentum to continue. Those long should remain in the trade with stops just under $7/bushel. In the last 3 days soybeans are lower by nearly 50 cents as prices retraced back near their 50 day MA; in May at $14.20. I think lower trade is likely but have no current exposure unless the clients put themselves in the trade. Today’s chart of the day was wheat. May futures closed higher by better than 2% finishing above the 20 day MA for the first time in 6 weeks. A penetration of the down sloping trend line should get shorts covering and the move higher well under way. My current trade is long futures while simultaneously selling out of the money calls 1:1.

Currencies: 7 month highs were rejected in the US dollar and we settled lower by 0.34%. A close under 82.50 tomorrow or early next week should signal today being the interim top. The Cable was higher by 1% nearly taking out the 20 day MA, a pivot point for the last 5 weeks. I advised clients looking for a fresh entry to get long in the Pound today. If the dollar does retreat we could see a quick 2-3% move here in my estimation. The only other viable play I see is long the CAD; higher by 0.50% today closing above its 20 day MA for the first time in 5 weeks. I’ve been advising bullish trade and feel you could ride the Loonie for an additional 1.25-1.50%.

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