Commodity Update: Crude To Probe Lower

closed lower by 0.86% yesterday and though $85 has supported in recent sessions I’m still expecting a probe lower in the coming sessions. A settlement under $85 should get us a trade under $83/barrel where I would likely be looking to reverse from short to long for clients. $87/barrel in December will need to contain any upside for me to keep this stance. RBOB closed 6 cents off its highs closing under its 8 day MA. They fact that we did not rally with supplies as tight as they are in the East coast to me means we should see further pressure as long as there are no delivery disruptions. Continue to use the 8 day MA as your pivot point. Support in December is eyed at $2.61 followed by $2.54. Heating oil closed in the green but well off its highs just under its 8 day MA. If prices start to roll over, we should see a probe of the 100 day MA at $2.98. Natural gas gained 2.12% back above its short term MAs. The only trade I’ve advised is short futures while selling at the money puts, so a move like this is against us but not too painful. Stay the course if the latest highs contain.

Stock Indices: Muted action in stocks as markets were closed yesterday and will be again today on account of Sandy. My sentiment remains bearish as both the Dow and S&P have pierced psychological levels 13,000 and 1400 respectively.

Metals: $1700 continues to support gold futures but once that level is breached, which I feel is just around the bend, expect the next leg to drag prices to $1675 and potentially $1645. My buy window would be between those two levels. Silver was just shy of a 1% loss with a close back under $32/ounce. Like gold, silver is meeting mild support at its 38.2% Fibonacci level which comes in at $31.75 in December. On a trade under that level my targets are $30.75 followed by $29.75. The closer December gets to $30 the more eager I would be to exit shorts and start scaling into longs. I suggest nibbling at longs because though the daily chart would be constructive at the aforementioned levels, the weekly charts in these two metals are ugly.

Softs: 5 days in a row cocoa prices have fallen, yesterday getting hit for 1.38% to put prices back at their 200 day MA. This level has supported since late July but a close under 2350 in December means 2300 comes into focus. In my opinion this will be determined by the US dollar’s price action. My suggestion is lighten up on any shorts. Lower trade was rejected in sugar but we still sit just off contract lows. Lightly scale into bullish trade willing to add when the market proves you correct. The 100 day MA remains your pivot point in cotton with a close just under that level yesterday. I expect a trade under 70 cents in the coming sessions but would have tight stops just above 73 cents on open positions. OJ lost 3.43% to trade at 2 month lows and more selling is expected. Do not rule out a test of contract lows 5.5% below yesterday’s close. A bullish engulfing candle in coffee gaining 2.47% yesterday. I still would like to see a bounce for a sale to be on my radar for clients. Resistance comes in just above $1.70 followed by $1.80 in December.

Treasuries: 30-yr bonds are above their 20 day MA higher 5 out of the last 8 sessions, gaining nearly 3 points. It will take a trade north of 151’00 in December futures for me to suggest bearish trade…stay tuned. 10-yr notes also gained, closing at 1 week highs just under their 20 day MA though above that pivot point overnight. I see a trade closer to 134’00 in our future in the December contract.

Livestock: My $1.25 objective in December live cattle has been achieved and we may not get much more. Solid support is eyed at $1.24 but we may not get there. If short and experienced this last leg I’d tighten up stops just above the 9 day MA to keep the trade profitable on a bounce. Feeder cattle bounced yesterday after trading to 3 month lows. Trail stops just above the 9 day MA as well here. Lean hogs were able to pare loses but still closed in the red down 1.39% probing the 20 day MA. I like bearish exposure targeting a trade to 75 cents in December. The suggested trade is a short future and selling puts 1:1.

Grains: After 4 days of selling, a doji star in December corn was visible yesterday. Perhaps an interim bottom, but as long as the 50 day MA caps upside I suggest bearish trade. I’m targeting a trade near $7/bushel on the next leg lower. January soybeans gave up 2.17% closing under their 20 day MA. Under $15.25 I see the next support in this contract at $14.90. Wheat continues to look for direction from the other Ags and weakness in corn and beans has equated to 3 losing sessions in wheat with prices approaching 2 week lows. $8.30/bushel should come into play in the December contract.

Currencies: 6 out of the last 8 sessions the US dollar has been in the green and yesterday was the first settlement above the 50 day MA since early August. I see further upside and at this point I’m targeting a trade north of 81… a feat that has not been reached since the first week of September. The euro is below its trend line mentioned in previous posts but remains above its 50 day MA. A trade lower is forecast as bearish trades should have stops just over the 20 day MA. The Loonie is the only commodity currency that I would suggest bearish trade currently. A settlement under par should lead to lower ground. I did advise traders to lighten up last week but those still in should be aiming for .9925 and potentially .9850. As long as December holds 1.2500 in the yen stay the course in longs attempting to play a bounce.

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