Commodity Update: More Downside To Gold

has been able to fight its way to positive ground 4 out of the last 5 sessions with January futures closing just below its 18 day MA yesterday. I am mildly friendly with a very small long position with some clients looking for more evidence of bullish trade. Speculators could be scaling back into bullish trade but I would advise stops just under the 8 day MA; roughly $1 risk in the futures. RBOB provided very little follow through after gaining 2.31% o close out last Friday. We are finding mild resistance at the 50 day MA; at $2.6675 in January. I think you could move 5 cents either way taking guidance from Crude oil. Until I get a clearer picture I have no long or short exposure. Inside day in heating oil closing lower by 0.82%. Prices will need to retake the 18 day MA at $2.9920 for me to have bullish trade back on my radar. Yesterday’s chart of the day is natural gas and after the 20% reduction in the last 3 weeks bullish trade is back on my radar. I am operating under the influence that an interim low is very close if we have not already established it. I issued buy recommendations in bull call spreads and back ratio spreads both in April yesterday.

Stock Indices: The S&P gained 1.26% recovering from the previous days loses. I have no faith in prices staying at elevated levels and still think there is likely a sell off into the end of the year. My clients that feel the same way are in a trade. They are short March ES from just above 1400 and they have sold out of the money puts 1:1 to cushion the blow. Currently they are under water approximately $700/per. After 3 days of losses the Dow also registered a positive day bouncing off its 9 day MA to close up 0.74%. Between now and the end of the year I’m targeting 12700 in March futures. In a perfect world at least for bearish trade we stay under 13200 in the next few sessions before we roll over again…

Metals: Gold has traded $40 off its highs from last week and as long as prices are under the 100 day MA I think we get more downside on this leg. That level in February futures comes in at $1710. Assuming buyers let go around $1685/ounce the next area of support is eyed at $1670. Silver prices are off 4.3% in the last 3 sessions as prices have completed a 61.8% Fibonacci retracement trading to my target. The 100 day MA is at $53.35 as of yesterday. I still am expecting more downside. My back ratio spreads have not worked out as well as expected as it has been a grind lower. If we get a trade near $31.50 in March I would be willing to let go and that should yield a decent profit. Stay tuned. If I am forced to cut losses on a move higher I will keep all informed. Clients are in March contracts that have 70 days until expiration so time is not of the essence just yet. Copper futures have started to back off as I feel March futures could leak back to $3.54; a 3.5% depreciation by year’s end. Bearish trades are advised with stops above the recent highs.

Softs: Cocoa prices could go either way so back off fresh entries; let’s wait for the dollar to determine a direction before making a bullish or bearish call. Sugar gained 2.1% yesterday adding to the 2.54% leap on Friday. Quickly prices have climbed back over their 20 day MA closing above that pivot point for the first time in 1 week. March bull call spreads are back alive. For new entries I am advising May call spreads. I’ve been preaching a 20/20.50 cent trade for weeks…will it finally play out? Cotton has far exceeded my expectations as prices have been on a one way track for the last 6 weeks appreciating over 8%. I would not jump in front of this train but I am looking for a reason and evidence why clients should be in bearish trade. Stay tuned. OJ has gained for the last 5 straight sessions as bearish trades from a few weeks ago should have been stopped at a loss. This is another market that I would like to gain bearish exposure on, thinking we are due for a correction. It's on my radar but no current open positions. Coffee perked up yesterday, closing higher by 1.96%. Only a small victory with prices off 6% last week. This is my worst trade on my books currently as clients are in March calls from late November. Win or lose I am giving this trade 2 more weeks, still targeting a trade north of $1.55 in March. I will post the final outcome.

Treasuries: In just over 1 week 30-yr bonds have completed a 61.8% Fibonacci retracement. This was forecast in recent post. The easy money has been made with March futures at 147’00 in my opinion. I am bearish with prices under the 9 and 20 day MA but I would not be opening new trade. In the same time frame, 10-yr note futures have lost nearly 2 points moving from overbought to oversold. As long as prices are under 133’00 in March I’d say we have more selling ahead. Although I was not in the trade because I was out of the office, the NOB spread worked perfectly gaining 2 points or $2000 in the last week. I will look for bearish opportunities if we get a bounce in the days and week to come.

Livestock: With the recent pop in prices, live cattle have advance to 10 month highs and are fast approaching 2012 highs. As long as February is supported by its 9 and 20 day MA we could see further upside. In full disclosure I missed this trade with clients. Talks about consistency feeder cattle have been positive the last 9 sessions, appreciating 6%. A 50% Fibonacci retracement is complete though a 61.8% retracement puts January above $1.56. Stay tuned. Lean hog prices started to trade south last week but the 9 day MA has supported; on a trade under 84.75 look for sellers to become more active. I’d be willing to gain bearish exposure with stops above the 20 day MA on a confirmed break.

Grains: Corn appears to be establishing a base after the recent break. The first hurdle that needs to be overcome is the 9 day MA which acted as stiff resistance yesterday. Clients have a light bullish trade on in March options and would be willing to add on signs of a bounce from current levels. In the last month January soybeans have gained nearly 9% trading north of $15/bushel yesterday for the firs time in 6 weeks. As long as the 20 day MA supports at $14.75 I would remain in bullish trade. As for the Ag complex, wheat has been dealt the worst hand of late down 5.5% in the last 2 weeks. It appears prices in March are basing out just above the $8/bushel level and if that level supports the next few days I’d be willing to wade into bullish trade. Stay tuned.

Currencies: The dollar is lower but only by 1.4% in the last week even with prices in the red 5 out of the last 6 sessions. I was wrong as I anticipated a trade north into the end of the year. We will need to see prices reverse immediately but for now I am on the sidelines here with clients. The euro is probing the triple top spoken about in recent posts. On signs of an interim top I’d be looking to play put options again for clients. Just like last time, we will need to be nimble as if we stayed in the last trade that was booked as a profit clients would now be in a losing trade. The Aussie and Kiwi are exhibiting signs of exhaustion so bearish trades are on my radar but I’ve yet to move. I’m thinking short futures against a sale of an out of the money put 1:1…stay tuned. Since my last post the yen has experienced another leg down but now both daily and weekly charts are saying a bounce is due. We are within tics of the 2012 low so risk to reward with tight stops light bullish probes make sense in my opinion just to pay bounce.

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