Commodity Update: Crude Oil, Gold Lower,

was lower on the session but found support at its 8 and 18 day MAs which both come in around the $106 level in September. I think we will continue to find selling pressure above $108 as we have and view a bearish trade as the best plan of attack here. My first target is last week’s lows around $103 followed by the 50 day MA currently at $100.15. RBOB lost 1.47% fast approaching the 38.2% Fib level that held last week. A trade under $2.9250 in September should get futures moving towards the 50 day MA at $2.87. Heating oil lost nearly 2 cents but pared losses closing at the 18 day MA 3 cents above intra-day lows. RBOB will likely fall harder but I do think heating oil is due for a correction. The crack spread closed over a dime premium to heating oil and the widest level in 4 weeks. Natural gas made fresh 13’ lows down eight of the last nine sessions. A 13% correction in the last 2 weeks I think is too much too fast. In recent sessions I’ve advised clients to start buying October and November back ratio spreads. On lower trade I may opt to buy back their bottom leg…stay tuned.

Stock Indices: A quiet day in the S&P as 1705 served as resistance for the second day running though futures were able to maintain the 1700 level. Inside day in the Dow with less than a 75 point trading range. Within a few dollars of 15600 so expect that line to be crossed in the coming sessions. The path of least resistance remains up but I’m a skeptic as any healthy move needs to experience corrections and they have been lacking in the equity market in the last 2 months.

Metals: Gold closed lower by 0.62% to end at its 20 day MA. For the last 3 sessions gold futures have been between their 50 day and 20 day MAs. Play a breakout above or below those pivot points but I am leaning to the bearish side thinking we trade back near $1265/ounce in the coming weeks. Inside day in silver with futures losing just shy of 1% closing under its 20 day MA. I am in the bear camp until we trade above the 50 day MA, currently at $20.50. As opposed to having clients in bearish trades I prefer to be a buyer at lower levels in both metals. For the last 3 sessions copper has challenged its 50 day MA, currently at $3.18 in September. Though we are 14 cents off the recent lows I think we have room on the upside and a penetration of that pivot point should get futures near $3.30.

Softs: Today’s chart of the day was cocoa. Cocoa gained 3.19% and on its highs traded to the 50% Fibonacci level. If dry weather persists in West Africa expect an additional 3-5% appreciation. I am looking to fade a further rally with clients. Sugar lost ground for the third day in a row closing under its 50 day MA. Additional 2-3% deprecation would get bullish trade back on my radar. Higher trade failed in OJ with futures closing under the 20 day MA for the first time since 7/11 when prices were 6% below current trade. I’ve suggested bearish trade in November thinking prices trade 5-8% lower. Coffee is making distance from recent lows putting on 4 cents the last 2 sessions. Long December futures with options protection is my favored strategy targeting an appreciation of 6-10% from current trade.

Treasuries: The 9 day MA caped upside in 30-yr bonds with futures giving up ½ point. That is your resistance point and I see support at 132’10 followed by 132’00. After a bullish engulfing candle in 10-yr notes on Friday I had hoped for follow thru but instead futures stalled. Support is eyed at 126’00 with resistance at the mid July highs near the 127’10 consolidation level. I am cautiously optimistic on the sidelines expecting a grind higher in both instruments. The Eurodollar continues to consolidate as it has for the last 2 weeks just under the 38.2% Fibonacci level. The best course of action is short 16’ futures against a call 1:1. On a jump higher I think we have 25-40 points of risk in futures and I would be willing to sell into that strength and let go of the option hedge at higher levels.

Livestock: Live cattle continue to find support at their 50% Fibonacci level as buyers have supported that level the last 3 sessions. If October catches a bid from current levels it will take a settlement above the 9 day MA to confirm further upside...that pivot point is seen at 125.20 in October. August lean hogs traded above the $100 psychological level adding just less than 1%. Traders willing to stay in bearish trade should roll out to October. October future jumped 1.85%. Learning from money lost with clients in August contracts it may make more sense to be long calls as opposed to short puts as your options hedge against short futures. That way if we continue to work higher you have a stop out level…just a thought.

Grains: A bloodbath in the Ag sector pulls most products back to multi-month lows. December corn lost 0.70% and on is lows traded within 6 cents of $4.50. Futures are trading at 34 month lows and if farmer selling continues a prices break $4.50 I am not ruling out a $4.25 trade. November soybeans closed 13 cents off their lows as we are finding some speculative buying interest and less farmer selling under the $12/bushel level. Let’s see if bulls can dig in their heels? Though I think both corn and beans can rebound until we get above their respective 9 day MAs I remain in the bear camp…in corn at $4.73 and soybeans at $12.10. December soybean oil near 43.00 has my attention as a base has developed in the last week. Futures closed at the 9 day MA today. I have started to price out bullish strategies…stay tuned. Wheat lost 2.27% to drag futures to the lowest trade in over 1 year. Like cocoa last week I advised recent entries to step to the sidelines and look to buy at lower levels. On signs of an interim low I will look to re-establish bullish trade. Those that have been in longer carrying open losses I will be likely lifting the options hedge this week. I am eager to see if we see an increase in exports this week with the lower trade.

Currencies: The Pound gained 0.42% closing above its 50 day MA but I expect the 61.8% Fibonacci level caps further advances. I favor bearish trade. Traders should use the recent appreciation to sell into in my opinion. I’ve opted for bearish option strategies in September contracts targeting a move back to 1.5000 in the coming weeks. I believe the Euro and Swiss can be sold with stops above the recent highs. The Loonie gained for the first time in 3 sessions but I do not expect much in the way of upside as I remain bearish metals and energies. I expect a .9500 trade before a .9700 trade in September. The Yen is back on track to trade higher closing above its 50 day MA on its way to $1.03/1.0350.

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