Commodity Update: Lacking Confidence?

is set to close at the highest level we’ve seen on a closing basis since late May as prices are approaching $90/barrel higher by 1.5% as of this post. My support in August comes in at $86 with resistance at $90.25 followed by $94. RBOB advanced for the fourth day running up 1.4% yesterday as prices have completed a 50% Fibonacci retracement. The next significant upside resistance which should be challenged is the 100 day MA at $2.92. Heating oil has completed a 38.2% Fib retracement also gaining 1.4% yesterday. As long as $2.76 holds in August I remain bullish with a target of $2.91. Natural gas gave up 2.5% but did hold onto the 18 day MA. I am still expecting a break lower thinking we see August under $2.55 in the coming weeks.

Stock Indices: The Dow failed to follow through after Friday’s jump as prices closed lower by 0.50%. Prices have yet to make up their mind as the up sloping trend line has served as a magnet in recent dealings. Prices could go either way and I have little conviction either way. The S&P too failed to make it to higher ground giving back 0.30% yesterday. It appears prices want to roll over but I would wait for confirmation before making that call, which would be done on a settlement below the 50 day MA. This level comes in the S&P at 1325 and in the Dow at 12535.

Metals: Gold closed near its highs of the day at the 50 day MA. Prices could go either way, though I think we should see lower ground. I think it will be tough to see gold trade lower if in fact the US dollar starts moving south so use outside markets for guidance. On the chart, a trade below $1565 should mean lower trade and above $1620 should lead to a challenge of $1650…trade accordingly. Silver was a slight loser yesterday but did pare its losses closing almost 50 cents off its lows. A penetration above $27.75 would get bulls interested while I still think we see lower ground. I currently have no client exposure in either metal.

Softs: Cocoa prices paused yesterday after the 7% decline in the last week. The easy money has been made on shorts as a triple bottom may be in the making. I’d remain bearish as long as prices remain under the 50 day MA; in September at 2225. If the greenback drops expect a pop in prices. For six sessions now sugar has remained sideways in a 50 tick trading range. I feel prices are overdue for a correction but I need evidence of an interim top. Expect bearish trades very soon. Cotton was only a marginal gainer but prices did close above the 50 day MA for the first time since the first week of March when prices were 27% higher than current pricing. We should see limited upside in the short run but I will watch for the sidelines. OJ has traded lower for the last five sessions giving up nearly 15 cents. Prices should breach the 50 day MA very soon and continue lower in my opinion. Aggressive traders can scale into bearish trades in September coffee looking for a 10-15 cent break in futures.

Treasuries: 30-yr bonds continue to inch higher as we approach contract highs made in late May. We could challenge those levels at any point but I just cannot justify higher ground…I am still searching for a reason to get short. 10-yr note futures made new highs trading tics above the May highs. On both instruments I would be willing to get short with size on a close below their 9 and 20 day MAs.

Livestock: The momentum should continue to pressure live cattle as I see no true support for another penny. That level held on a closing basis on all previous attempts and should be challenged in the coming sessions so let’s see…stay tuned. Feeder cattle traded down the daily limit and have lost nearly 8% in the last week. Need I remind you that a major support line was breached last week…see chart of the day. Prices are oversold but are expected to breakdown further. While lean hogs have completed a 50% Fibonacci retracement I expect more movement south with a target of 89.00 in August.

Grains: Corn gained 4.4% to lift December to fresh contract highs. Prices are now within 15 cents of their 2011 highs. I think we see much higher pricing but I am calling for a correction before that. Since I have called for a correction prices have gained 50 cents so take that into account...I could be wrong. November soybeans got within 2 cents of $16/bushel, a level not seen since 2008. There is very little upside resistance above these levels but a major correction could still occur in my eyes. Wheat picked up just better than 4% to lift price over $9/bushel. 2008 circumstances were a lot different but price were north of $13 so prices have a lot more potential. All things considered a correction needs to happen before I would suggest committing more money to bullish plays in this complex.

Currencies: The US dollar mat have hit an interim top as the stochastic on the daily chart is rolling over and prices have decreased slightly in the last two sessions. Prices need to close below the 20 day MA for confirmation, in September at 82.75. On that my target would be 81.50. In my opinion aggressive traders can scale into longs in the Swissie and Euro with stops below the recent lows.

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