Commodity Update: Gold At Its Lowest Close in 6 Months

failed at $98 but held above its 8 and 18 day MAs. It will take a trade above or below the aforementioned pivot points to determine the direction of the next leg. My bias remains on a lower trade. A probe higher failed in RBOB with a close 5 cents off the highs just above the 8 day MA. That level will need to be breached to see prices trade south - as we speak, an interim top may be in the making. A lower high and lower low in heating oil with futures closing lower by 0.54%. On a break lower expect March to find its way back near $3.12. I am getting mixed signals in natural gas so I am backing off fresh entries. A close back above the 8 day MA would get me interested in probing bullish plays. Some clients are holding onto trades from previous weeks and are under water.

Stock Indices: The S&P remains at elevated levels just above the 9 day MA - what a broken record. I figure if I write the same exact content enough I will remind myself that prices are way too high and should correct in the coming weeks. Sometimes we need to listen to our own advice. I am anticipating a 5-7% break any day now to commiserate. A 14000 trade was rejected in March Dow futures today and the 9 day MA was also challenged on the lower end of the range. A breach of either level would set the tone. Consecutive settlements under 13900 would likely lead to the start of the 500 point correction forecast, in my opinion.

Metals: Gold lost 0.27% to its lowest close (not trade) in 6 months. These levels have held since but I anticipate a break down dragging prices closer to $1600/ounce in the coming days. I am eager to buy for clients if given the opportunity on that retracement. Silver remains under the up sloping trend line we broke yesterday. I see lower trade ahead and would to rule out a sub $30 trade in March futures. On that, I would be offsetting bearish trade and starting to shop bullish trade. Based on yesterday’s comment I said I would be willing to sell a rally in platinum…today, the market delivered and aggressive traders should be willing to fade this rally. I think we could see a $25-40 break from current levels.

Softs: May cocoa has been virtually unchanged to last 2 sessions down $2 and flat. I think we are finding a value zone and have advised clients to scale into bullish trade in May and July contracts. Sugar has been unable to get below 18 cents so though premature to call a bottom a trade back above the short term MAs we should see buyers re-emerge. Those pivot points are 18.40 in March.

Cotton has lost ground the last 2 sessions closing under the 20 day MA for the first time since mid-January when futures were near 75 cents. I have advised bearish trade and think we could see more selling ahead. OJ added another 1.37% today finishing a 61.8% retracement which took just over 4 weeks. I see limited upside until we get a correction back near $1.15 in March. Coffee lost 1.35% to close under $1.40. In the last 3 weeks we’ve retraced all upside seen in the previous 6 weeks. I have a light bullish trade on with some clients that are currently down. Buying will need re-emerge or I will advise to cut losses.

Treasuries: 30-yr bonds lost nearly 0.50% to close near the recent lows. Until we get back above the 9 day MA in March sentiment is bearish; that level is 143’9. I prefer to be a seller from higher levels than to be long at this juncture. 10-yr notes closed lower for the third consecutive session; today ending just above 131’00. If the January lows give way momentum traders could squeeze notes far an additional point. My thinking is equities taper off and we see a reversal that lifts Treasuries higher…stay tuned.

Livestock: Live cattle are not closing on their lows but needless to say they are still trending lower as the near dime correction in recent weeks has not attracted buyers just yet. I think we are relatively close to turning but be patient. Feeder cattle lost 1.33% today on top of the 1.07 drop yesterday. Lower trade looks likely. April lean hogs are at fresh 4 ½ month lows though we are very oversold and close to a value zone in my eyes. Those ready to commit capital could get long futures and sell out of the money calls 1:1.

Grains: 9 down days in a row but losses were pared as March corn futures closed nearly 10 cents off their lows. Aggressive traders could start legging in willing to let go on a trade under $6.85 in March and be willing to add on a close above $7/bushel. A doji star on the daily soybeans today though the 50 day capped upside. A settlement back over $14.27 and I think trader can start to probe longs in old crop beans. While I’m not prepared to say this is a buy and hold but for a trade I think we could see 40-60 cents. Lower trade was rejected in wheat with a settlement up by 0.48%. I’ve suggested buying wheat, at a minimum I think we can return to the 50 day MA which in March stands nearly 40 cents above current trade.

Currencies: The dollar held its 50 day MA and as long as that level holds I remain friendly; in March at 79.90. The Euro closed at its 20 day MA as my bias is still leaning lower. A trade under $1.3300 would be my window to start unloading bearish trade for clients. The Pound descent has been incredible - shorts I advised left the party early. March futures have lost nearly 5% in the last 60 days. The race to the bottom is on in the currency war: Is the Pound the next Yen? The commodity currencies have been trading higher in recent sessions but if we get the anticipated break in metals and energies forecast we should see a u-turn…trade accordingly.

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