Commodity Update: Crude Down Nearly $4 In Last 3 Sessions

has fallen nearly $4/barrel in the last three sessions. As long as prices are under their 8 and 18 day MAs I am in the bear camp. My objective in October futures is the 50 day MA, currently at $102.14. Those short futures could opt to buy out of the money calls as a partial hedge. RBOB was higher and heating oil was lower yesterday which is good for clients positioned in September crack spreads. I am expecting this spread to narrow 300-500 points within the next week. Natural gas probed the trendline yesterday but is a triple top in the making. I have clients in bullish trade looking for more upside...will today’s AGA be the necessary catalyst to see an additional 10-15 cent advance? On that I would exit open bullish trade.

Stock Indices: The S&P failed at its 50 day MA yesterday and closed just off its lows finding support at the 50% Fibonacci level. The 100 day MA remains my exit door on bearish trade. Currently that pivot point stands at 1626. The Dow gave up nearly 1% yesterday, closing lower for the sixth consecutive session. The 100 day MA should serve as a ceiling for upside advances as a grind lower is expected. The lows from June are the next downside objective, roughly 300-350 points from current trade.

Metals: Gold continues to bump up against its 100 day MA, failing to break above that pivot point the last 4 sessions. It will take a settlement under $1355/ounce to confirm more deprecation is coming but I expect that very soon. A trade back to the 50 day MA is my call, approximately $60 from current trade. Sloppy sideways action in silver the last few sessions as this metal is trying to make a decision on its next leg. $23.40/23.50 appears to be resistance while downside support is seen at its 100 day MA just above $22/ounce. I think futures could see a violent 5-8% correction just around the bend, so trade accordingly. I like buying inexpensive September puts just in case.

Softs: After higher trade was rejected Tuesday, we experienced some downside follow-through today with December cocoa futures off by 2.78%. I started working into more bearish trades for clients yesterday, short futures and selling out of the money puts 1:1, trying to capitalize on a move back to 2325/2350 into next week. Sugar is lower for its fifth day running and we are now within 2.5% of the contract lows from July. Do not rule out a probe of that level. Cotton gave up another 5% yesterday after the 4.3% drop Tuesday. Hopefully some followers took advantage of this rout. The back ratio spread I recommended recently was taken off yesterday for clients, just better than a double. I called for this move but did not anticipate it happening this quickly. The idea is to make quick money and move to cash and eliminate your risk. If only all trades could be ½ as successful as this one. OJ continues to grind higher advancing 2.22% yesterday and nearly a dime off its lows from last week. Trail stops and milk the trade as there could be another nickel, in my opinion. Coffee made a fresh 4 year low, off 1.39% yesterday, making it the fifth consecutive losing day. I’ve opted to stay long December futures but rolled down my option hedges. At this point I'm just managing the trade in case prices leak lower before reversing.

Treasuries: Another negative close in 30-yr bonds. I’m in the bear camp until the 9 and 20 day MAs are taken out, at 132’23 and 132’27 respectively. On their lows, 10-yr notes got within 1 tick off their lows established on 7/8, which was the 13’ lows. Any penetration of that level and I'd expect momentum traders to push prices lower. The 9 day and 20 day MAs serve as resistance in this instrument as well, currently at 125’09 and 125’30 respectively. Eurodollars pared losses but intra-day traded to their lowest levels since 7/8. Continue to add bearish exposure. My favored play is short futures against long calls in 16’ contracts.

Livestock: Live cattle probed the 9 day MA but managed to close just above that pivot point. Overnight futures are below that level. Today may prove to be the beginning of the correction I’ve been calling for. A 50% Fibonacci retracement in October futures puts this contract back under $125. October lean hogs gave up 1.29% closing just above its 20 day MA; 85.52. The 9 day MA at 86.65 should now serve as resistance on any advances. Further depreciation is expected as I am not ruling out a trade back to levels seen in late July approximately 3% from current trade.

Grains: December corn gained 1.63% yesterday but for the last three sessions resistance has been seen just above current trade. I do think we can get a bounce higher but I am looking to sell corn on a trade near $4.95/5.00 bushel. The more interesting trade in corn is the spread that some clients are in, long September and short December 1:1. Yesterday this spread picked up 7 cents, an additional 5-10 and I will be looking for an exit. This is the type of low risk trade that I love. Try to view the spread chart in your trading software. A rather informed meteorologist thinks we can get some precipitation in the next few days in the Midwest. If he is correct we should see soybeans back off. That being said we bought some $12 October puts yesterday for $250-300/per just in case. If November futures were to trade back to their 50 day MA it would represent a 50 cent decrease and it could happen quickly in my opinion. Wheat attempted a rally yesterday, but failed at its 18 day MA and ended nearly a dime off its highs. The 9 day MA did hold but if corn and beans break I expect a revisit of the lows.

Currencies: Yesterday’s chart of the day was the greenback. The dollar closed positive but did fail at its 20 day MA which is the first hurdle that needs to be overcome to see the advance I anticipate. The dollar higher should mean a lower euro, pound and Swissie. The only cross I currently have client exposure to is bearish trade in the cable. After sixconsecutive higher days, overnight futures are lower by 0.42% and we may finally get the correction I’ve been calling for. A trade back to the 50 day MA in September futures puts prices at $1.5350. The commodity crosses should continue to grind lower especially if the energy sector continues lower and the metals roll over as I’ve forecast. The yen could go either way so stand aside.

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.