Commodity Update: Greece – The Cure Or Hangover?

is showing signs of life even with a close only slightly higher; We did probe the 8 day MA for the first time in one month. The last time we had a close above that pivot point, prices were over $100/barrel. I maintain my buy recommendation on Crude near $90 thinking we get an advance of $5-7 in the coming weeks. RBOB closed higher for the third consecutive session also probing the 8 day MA, settling just below that level. A close over $2.88 in July should get this market trending toward $3/gallon. Trade accordingly. Heating oil was unable to hold on to its early gains but I think--like Crude and RBOB--we are due for a bounce. As long as $2.80 holds I remain friendly with a target of $2.95-3.00 in the coming weeks. Natural gas lost nearly 5%, almost completing a 50% Fib retracement as forecast in three trading days. Short term this market should remain under pressure as I could see another 15-20 cents relatively easily.

Stock Indices: Equities traded higher yesterday, closing at one week highs advancing 1.25-1.4%. Prices are approximately 3.5% off their lows from last week and looking at the move I say we’ve completed half the bounce we should get. If my analysis is correct that would lift the S&P to around 1375/1380 and the Dow to 12850/12900 before prices head back down. I am more interested in selling from higher levels then riding a wave higher with clients.

Metals: Bearish engulfing candle in the daily August gold chart as the yellow metal is having trouble getting out of its own way. The significant levels in this contract are as follows: support $1535/1540 and resistance at $1595 followed by $1630. As long as prices remain above support on a closing basis I remain friendly. Silver lost just shy of 2% closing back under $28/ounce. Though I do not see prices falling apart when the commodity closes below $28/ounce I would be out of all bullish trades. The reason being, prices could prove $27 when trying to find a bottom and that is a $5000 move per standard futures contract. A settlement above $29 should ultimately lead to $30.50 in July futures. I see a bounce in copper from oversold levels. $3.65- 3.70 in July would be my target. A triple bottom formed in platinum futures last week and as long as that level supports I like bullish positioning in this contract. I think we could see prices advance $100 in the coming weeks. Trade accordingly.

Softs: Sugar is on my radar but I don’t like the price action. If probing longs, keep your size small until the market proves an interim bottom is in. I’m still thinking we get a bounce in cotton. I mention this not so much as buy recommendation, but if we get a bounce look to sell from higher levels. Those short have been advised to hedge off their positions. Coffee continues to come under pressure and a breach of $1.65 in July would mean the start of another leg lower. Support is not seen for another 5%. OJ has gained in five of its last six sessions as a bounce is underway. A possible way to play appreciation in the coming weeks would be ratio spreads. I see resistance just under $1.40 in July which should serve as a target.

Treasuries: 30-yr bonds and 10-yr notes continue to dance around the 9 day MA and until we get consecutive settlements below that pivot point I would not be getting short with any size. Do I think prices are too high…of course! But that does not matter. As the saying goes, markets can be irrational longer than most investors can be solvent.

Livestock: Mixed results yesterday with live cattle slightly higher and feeder cattle slightly lower. My bias remains down for both products. Live cattle have stalled of late but further pressure is my assumption as my downside target in June futures is 114.50/115.00. Feeder cattle completed a 38.2% Fibonacci retracement closing on their lows yesterday. I’m expecting a 50% retracement to be the next stop, at 157.50 in September. October lean hogs closed above their 20 day MA for the first time in one week. It is advised to start working long again. I like the idea of long futures while selling out of the money calls 1:1.

Grains: Support was broken as corn traded to fresh 2012 lows down nearly 3% yesterday. This is exactly why I advised holding off on longs because from here we should still see lower ground. In the July contract I would not rule out a trade closer to $5.40/bushel. If corn remains under pressure we may get an opportunity to buy December under $5 ahead of the USDA report. July wheat broke the 9 day MA as predicted giving up 3.4% to close at one week lows. I’m looking for another 3% which would complete a 61.8% Fibonacci retracement. Until soybeans close back above their trend line roughly 20-25 cents above yesterday’s close I am in the bear camp. Oats lost 5.3% yesterday to trade to fresh 2012 lows. Until we find some buying here grains should remain under pressure. Soybean oil failed to take out the 9 day MA but this should be temporary as I expect higher trade in the coming weeks. Use this retracement as a buying opportunity.

Currencies: On the daily chart the stochastic reads 94 which means overbought. That alone will not cause the dollar to back off but the fact that a worse-case scenario appears to be factored in means money has flown to this safe haven. When things shake out that premium should be sucked out. That is not a short recommendation just a heads up as other crosses should catch a bid if the dollar trades back to 81.00 in the coming weeks. The commodity currencies, including the Loonie, Kiwi and Aussie, have already found a bottom and have started to bounce. Aggressive traders could gain bullish exposure in the Loonie and Aussie with targets as follows; .9900 and 1.0075. Continue to trail stops in the Cable but the easy money has been made. When the dollar backs off, expect a 1.50-2% appreciation in one day.

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