Commodity Update: Crude Oil Fails At 8 Day MA

Financials: A failed higher trade and a lower close in the equity market which has been an aberration of late. The S&P has only closed in the red three out of the last sixteen sessions. 1750 serves as psychological pivot point in the S&P. As for the Dow could we be making a double top at 15660? I am operating under the influence another 2-3% correction could play out. Bearish probes in futures should have tight stops above recent highs. 10-yr notes and 30-yr bonds futures appear to be stalling at current trade. Will today's FOMC non-event serve as a catalyst to get yields moving higher short-term? If so look for December futures to find support in 30-yr bonds at 133'00-133'16 and 10-yr notes at 126'16.

Energies: Crude oil failed yesterday at the 8 day MA and has given back in the last 2 days the previous 3 days of gains. Today marks not the lowest trade but the lowest settlement since 7/2. Next solid support in December WTI futures is $94.50. The biggest surprise to me was the Brent/WTI spread which is trading near $13/barrel, the widest margin in 8 months. December futures are $1.25 from their widest margins seen as the spread has fallen off a cliff since trading near even money just 10 weeks ago. I think WTI find support very soon. Possible ideas - buying WTI and selling Brent and buying 13' and selling 14'. As the products get above their 20 day MA a buy signal should be confirmed. Natural gas has declined 10% in the last 2 weeks. I've yet to make a move but position traders have been warned that I am looking for bullish entries in the near future.

Metals: Gold is meeting resistance near $1360/1365 with futures running out of steam and closing in the red the last three sessions. A settlement below $1335/ounce would signal a trade back under $1300. While silver maintained a positive close futures closed nearly 40 cents off it's highs. Support at $22.50 followed by $21.50.

Softs: Cocoa is 4% off the recent highs challenging its trend line that has held since June. If the US dollar continues to rebound expect the cocoa market to lose another 3-4%. Sugar has shed nearly 10% in the same time frame. As I wrote in yesterday's daily piece I have advised clients to start layering back into bullish trades. Cotton has been virtually a one way trade for the last 3 months and lower the last 9 consecutive sessions. My opinion futures are too low so expect a bullish trade idea very soon. I do not feel a trade under $120 in January juice is sustainable. I expect to see a $130 trade within the life of that contract with an exit if fresh lows are made. Contact me for exact pricing. Kevin Davitt, myself alongside EGSI Consulting published our monthly coffee report yesterday. Get on our distribution list if you are not already.

Currencies: Three of the last four days the US dollar has been in the green. The first hurdle is the 20 day MA which was challenged today...in December at 79.91. Dollar up should equate to other crosses down....let's explore. The Euro, Swiss and Pound have already started to work lower...though the Pound is the only aforementioned currently under its 20 day MA, enter bearish trade admitting you're wrong on a fresh high ($1300-1500 of risk per futures depending on stop placement.) Target are as follows: 1.3600 in the Euro, 1.0950 in the Swissie and 1.5850 in the Cable. The Commodity currencies have started to work lower and could see more pressure on weakness in metals as I do not see much lower trading in energies. The only open trade I have on for clients in this sector is bearish trade in the Yen...which I closed under its 50 day MA today. On this leg lower I think we get a trade under par which I would use as an exit signal.

Livestock: A bearish engulfing candle in live cattle today with December futures giving up 0.86% today. A 50% Fibonacci retracement puts this contract near $131. A key reversal in lean hogs today...perhaps? December futures have failed above 92 cents the last three sessions. Probe bearish trade looking for a return to 88 cents.

Grains: Corn continues to chop around the $4.30 level. I have no outright directional trades on...the only trade I am in for clients is long corn against a short wheat 1:1. $13 is your pivot point in November soybeans as we have been back and forth on both sides of that level. I have no opinion. Soybean oil has recovered the last week of losses in the last two sessions challenging the 50 day MA today. I anticipate higher trade and have a small bullish options position in January with select clients. Wheat gave up nearly 1% today closing at 5 weeks lows today. A trade back to the 50 day MA puts December futures under $6.65/bushel. That is my target for open trades.

Risk 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.