Commodity Update: Silver In Favor

finished yesterday under the 8 day MA and though the 18 day MA was probed the last 2 days it has held on a closing basis. I expect a trade under that pivot point would lead to more selling. That level is just above $96. The selling was short lived in RBOB as prices recouped most of Monday’s losses yesterday. We will need to see the 8 day MA breached to see more selling in my opinion. A trade below $3/gallon in March should lead to a trade back near $2.90. Heating oil broke out to fresh highs gaining 1.18% as prices are approaching 5 month highs. I suspect we are very close to a tipping point and would advise longs to tighten stops. Natural gas closed higher by better than 2.5% at its 18 day MA. I like scaling into bullish trade thinking we could see a quick 20-30 cent appreciation.

Stock Indices: The S&P is back above its 9 day MA closing higher by 0.84% yesterday, putting prices back above 1500. My target is the 50 day MA /38.2% Fib level at 1445 in March futures…trade accordingly. The Dow also got back Monday’s losses, picking up 65 points yesterday. For the last 3 days the 9 day MA has been the line in the sand but a breach of that level should open up the flood gates. I think there are a large number of retail traders that are being sucked in, chasing returns, and they will puke on what appears to be the start of a correction. Time will tell as I hope I’m not speaking my position.

Metals: Gold made another attempt at the 50 day MA failing once again. A trade above $1690/1695 in April would signal extended upside but I remain in the camp that we see a trade lower before that happens. I think April futures will trade under $1640 in the coming weeks. Higher lows and higher highs put silver in favor as prices pushed above their 50 day MA yesterday. Trades above $32.25 have been rejected in recent weeks and that should remain the case in my opinion. I have an interest in bullish trade closer to $30.50/ounce.

Softs: On the 2.46% appreciation yesterday cocoa is at 1 ½ week highs and closed above the down sloping trend line that had capped upside since the first week of December. I like bullish trade thinking we could see an additional 7-10% from here. Sugar gave up 0.91% to close under its short term MAs. Buy this dip as the prospect for higher trade in the coming weeks to months is good to me. This will be a grind, but for patient traders it could be a good fit and a value under 19 cents/lb. Albeit a marginal loss, cotton finished in the red the last 4 sessions. Prices are under their 9 day MA and poised to move under their 20 day MA; in March, that would be just under 3 cents lower. March OJ is running into resistance just under $1.25…I would buy a dip and try to play higher action in the coming weeks. Coffee is nearing oversold levels on the daily chart and with the stocks/usage relatively tight I think bullish trade needs to be on your radar with prices near $1.40.

Treasuries: 30-yr bonds did a u-turn and gave back Monday’s gains. To me, a base appears to be forming to launch a move higher in the coming weeks. 10 yr-notes were unable to penetrate the down sloping trend line that has capped upside since early December. I expect this to change in the coming sessions. Again, my stance is equities lower should equate to higher Treasury prices.

Livestock: April live cattle should fill the gap formed last week which puts cattle under 1.31%. Until that happens, stand aside. Feeder cattle have gone nowhere of late but lower trade looks likely here as well. March would need to trade under $1.46 for me to re-explore bullish trade for clients. Lean hogs are lower by almost 3% in the last week but I do not see stiff support in April for an additional 2-3%.

Grains: Corn is down the last 3 days and if we break the 20 day MA just under yesterday’s lows, more selling should persist. On bearish weekly numbers do not rule out $7/bushel. Lighten up on bullish trade in soybeans. I am not advising bearish trade but after a 10% appreciation in recent weeks I think a setback could play out, not to mention the $15 level has contained upside of late and this is a big psychological hurdle. The easy money has been made on bearish wheat trade so start scaling out of shorts and reversing as I see limited downside from here.

Currencies: The dollar probed its 20 day MA but failed to take out that level, March needs to get above 79.80 to see further upside. The euro remains a sale in my book as I’m targeting $1.3300 in the coming weeks. The pound may continue to get beaten up but I prefer the idea of booking profits on remaining shorts. The yen is a dog and will continue to be a dog. Refrain from picking a bottom as it will stop going down when it does. I thought a move to par was farfetched but not so much any more. Only an additional 6.5% loss on top of the 17% loss we’ve seen in the last 4 months. Again I tip my cap to trend followers…between OJ which they should be out of, the yen and stocks, it has been a great start to the year.

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