Commodity Update: Crude Forms A Solid Base

showed some resilience yesterday closing back over its short term MAs gaining 0.75% as of this post. This should tell market participants that oil is much more than just the Middle East as a cease fire was announced and still Crude held its own. I still maintain a solid base has formed and we should trade north from here. Trade accordingly. My target in January futures is $92/barrel. RBOB bounced off its 50 day MA to close just off its highs nearly 1.50%. A penetration above the 61.8% Fibonacci level should lead to an assault of the trend line near $2.77. Heating oil gained 1.08% to close above its 50 day MA. A triple top has formed so we will need to see higher trade in the next few days or, in my opinion, a correction will happen. Natural gas closed higher by almost 2% closing above $4 for the first time in 1 month. Traders should have been stopped at a loss on bearish trades. I’d like to get clients long on the next correction, assuming it plays out in the coming weeks.

Stock Indices: The S&P has gained the last 4 days as prices are now a few dollars from their 20 day MA. Short term my objective is the down sloping trend line about 15 points above yesterday’s settlement. If the bears can stay in the driver’s seat, my ultimate objective is the 50 day MA just under 1225. The 9 day MA should support any back fill at 1372. The Dow has also been in the green in recent dealings closing at 1 week highs at 12800 in December futures. 13000 is within our sites while the 50 day MA in this contract comes in at 13185.

Metals: Lower trade was rejected in gold as prices closed slightly positive yesterday, getting back most of the previous day’s losses. I’m getting mixed signals from outside markets so I would keep your size small. The fundamental picture is bullish but until prices can retake their 50 day MA currently at $1744 I would not rule out a trade under $1700/ounce. Silver gained 1.28% to close above its 50 day MA for the first time in 1 month. This generated a buy signal but I did not act on behalf of clients. I will re-evaluate next week and see if that was the correct move. The lower entry I can get the larger position I would establish. Either way I should have some sort of long strategy into next week unless we get a reversal in the coming sessions.

Softs: Cocoa futures continue to struggle at 2480 unable to penetrate that level now for 3 weeks. It will likely take a falling dollar to jump that hurdle. If that happens, next stop should be 2535 in March. Sugar lost 1.31% yesterday but remains above the 9 day MA and 1 cent off the lows. Clients remain in their bullish trades targeting higher levels in the coming weeks. Cotton has gone nowhere quickly but as long as the 9 day MA holds I remain friendly. Could the market be taking a breath before the jump to 75 cents? The best performer in this complex by far has been OJ (not Simpson). Frozen concentrate has appreciated 20% in the last 2 weeks and is almost at my objective, a level I thought it would take months to reach. The sad truth is it has happened so quickly I missed the trade for clients. I will need to go back to the drawing board on strategy but I like bullish trade on a correction lower. Indecision remains in coffee as prices continue to stall near their contract lows. Clients still have upside calls and are under water, but we believe. We believe prices could appreciate 5-8% in the coming weeks.

Treasuries: For the third session in a row 30-yr bonds traded under their 20 day MA yesterday, the first time in 3 weeks. Both my objectives have been reached so my clients have exited the trade. I believe the easy money has been made but do not rule out more selling. If stocks continue to appreciate 30-yr bonds should lose ground; A 61.8% Fibonacci retracement puts December at 148’14. 10-yr notes have competed a 38.2% Fibonacci retracement as the lows of the day was the 20 day MA. Selling should persist at a slower pace in notes as long as equities are well bid. Do not forget the NOB spread as it has been picture perfect in this environment.

Livestock: Live cattle challenged 1 month highs gaining 0.84% yesterday. I see limited upside and as markets hesitate in the coming weeks I will be exploring bearish trades from overbought levels. Stay tuned. Feeder cattle bounced off their 9 day MA slicing through the 20 day MA like a hot knife through butter. The 50% Fib level is eyed at $148.10 and the 61.8% at $148.90. I cannot declare an interim top but new highs being rejected, a bearish engulfing candle and a close on the lows is enough for me to price out bearish trades in February lean hogs. Assuming we trade south from here I think a reasonable objective would be 83 cents.

Grains: Corn failed for the first time in 4 sessions challenging the trend line. As long as the 50 day MA supports, stay in bullish trade. What was resistance has now become support. Some clients have gained light bullish trade targeting higher trade in the coming weeks. Soybeans too closed slightly lower, just below the 9 day MA. As long as the recent lows hold I like scaling into bullish trade. As for the January contract, my first upside objective stands at $14.50 then $15/bushel. Yesterday was an inside day in wheat. Prices have been unable to retake their 9 day MA to date. Wheat should move with the whole complex but I am very unimpressed with the lack of a bounce in recent dealings.

Currencies: The dollar has not really lost too much value but it has closed in the red 6 out of the last 7 sessions. Lower trade is imminent in my opinion and on a close under the 20 day MA sentiment would likely shift. The euro, pound and Swissie should continue to benefit from weakness in the greenback. My favored play for the 3 aforementioned crosses remains the cable. The Loonie has yet to make a move but I like layering in longs targeting higher trade. The 20 day MA should support, currently just above par. The yen remains a one way trade losing another 1% today and lower by 6% in the last 2 months. Lower trade appears likely.

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