Commodity Update: Possible Bullish Sentiment On Gold

A $4,600 trading range in Crude oil today so tread lightly. The key levels in my eyes remain the 8 day MA ($107.82) and the 18 day MA ($106.57). Those that are short WTI could consider a partial hedge being long 1/2 their short in Brent. This spread in October is trading just above $7 after trading at even money just over one month ago. It will take a trade below the 50 day MA for me to consider an interim top has been established. RBOB finished lower for the third day running probing its 18 day MA today. I am looking for a trade under the 50 day MA here as well. Heating oil was a slight gainer closing just above its 8 day MA. A settlement under $3.09 should be followed by a probe of $3/gallon. Natural gas gained 2.37% to trade at its highest levels in 5 weeks. My upside objective in October overhead are at $3.72 followed by $3.86. About another 10 cents and I will be out of all remaining bullish trades with clients.

Stock Indices: The 100 day MA remains the line in the sand in the S&P, currently at 1633. A close under that level should lead to a probe of 1600 in my opinion. The next catalyst I see is Friday’s jobs number. The Dow has been in a 175 point range the last 5 sessions maintaining a trade under 15000. I don’t think this leg has completed and still see more downside. My objective is the June consolidation levels in the Dow approximately 300 points lower.

Metals: A bullish engulfing candle with most of the action this afternoon lifting December gold 1.14%. $1400 remains a key pivot point in this contract. Sentiment will remain bullish in my eyes as long as we maintain the 100 day MA, currently at $1360. Silver appreciated 3.90% lifting futures back over $24/ounce. Resistance is seen just under $25 while support is seen near $23. It would not surprise me to see a sharp reversal lower in the coming sessions so if long trail stops on the way up.

Softs: Cocoa has lost ground the last 3 sessions finding support the last two days at the up sloping trend line. I’m expecting a trade near 2300/2325 - trade accordingly. Today’s chart of the day was sugar which happened to close in the green for the first time in 5 days. Only a mild gain and prices are still below their 50 day MA but I think scaling into bullish trade at these devalued levels makes sense for longer term position trades in 14’ contracts. OJ lost 3.46% to trade to its lowest trade in 2 weeks. Do not rule out an attempt to challenge the June lows approximately 5% lower. Coffee ended 2 cents off its highs but still maintained a positive close. My favored play remains bullish futures exposure in December with an options leg for downside protection.

Treasuries: Yields were on the move higher today which contributed to the decline in prices in the debt complex. 30-yr bonds closed under their 20 and 9 day MAs declining 1.22%. What was support now becomes resistance. Those pivot points are 132’12 and 132’6 respectively. 10-yr notes pared losses but on its lows were trading within 5 ticks off the recent lows. Expect fresh lows to follow. Continue to build a bearish position in 16’ Eurodollars.

Livestock: Live cattle lost 0.47% to drag October futures to their lowest trade since 8/7. Lower trade looks likely as I am still targeting a trade near $125 in this contract. October lean hogs are within 1/2 cent of their August highs adding 0.43% today. The path of least resistance is higher on this contract as a fresh 13’ high is my call.

Grains: A bearish engulfing candle in December corn played out today with futures losing 1.40%. The 18 day MA held on its lows but a penetration of that level, currently at $4.70 would likely signal lower ground. November soybeans gapped higher ending the session higher by 2.15%. There is very little upside resistance above the $14/bushel level but I think we revisit the 50 day MA currently at $13.50 before a leg higher resumes. I started to price out bearish strategies in December soybean oil today…stay tuned. Wheat also registered a bearish engulfing candle on its daily chart giving up just better than 1% closing below its 18 day MA. Those long futures may opt to cut losses and allow their option legs to turn into a bearish trade. I will evaluate exactly that tomorrow for clients.

Currencies: The US dollar gained for the fifth day running closing above its 50 day MA for the first time since mid-July. A 50% Fibonacci retracement lifts futures to 82.20 while a 61.8% retracement puts September futures at 83.25. The Euro and Swiss closed under their 50 day MAs and appear headed for lower ground. The standout today was the Aussie gaining 1.73%. The RBA left rates unchanged at 2.5% and I think the market had expected another cut. The Yen broke down today closing below its 50 day MA as a trade under par looks likely…Fade rallies. If the Pound does not break down in the coming session traders in bearish option trades should cut losses.

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