Commodity Update: The Vote Heard Across The Land

finished lower on the week but prices were able to pare losses closing $3 off their lows. August becomes the front month next week and I see solid support between $82/82.75. It will take a settlement above $85.50 for me to believe a higher leg has begun. Scale into bullish trades as $90 should be seen by this time next month in my opinion. RBOB finished near its highs Friday, closing over the 8 day MA gaining 1% today. I’m operating under the influence the solid base formed in recent weeks will support and prices are headed higher. Heating oil remains the laggard as prices were unable to overtake the 8 day MA again today even with a positive close. I do not see weakness in heating oil and strength in the rest of the complex so all products should gain together in my opinion. $2.85 remains my first target in heating oil futures once we get moving. Natural gas lost 1% Friday after the monster move Thursday. Buy a dip as I think the summer lows have been established.

Stock Indices: Stocks finished higher on the week closing just off their highs Sunday night. They closed out the week much where they started after the Spanish bailout. The key this coming week will be if the S&P can penetrate the 50 day MA which capped a further advance and if the Dow can remain above that pivot point. A trade decisively above those pivot points next week at 1340 and 1265 should lead to higher ground. My target in the S&P is 1370 and 12950 in the Dow.

Metals: Gold has finished higher five out of the last six sessions and the fact that prices settled above the 50 day MA to close out the week is a positive development. Once August futures take out $1635, I expect $1670 to come into play. I like bullish exposure. Silver gained over 1% Friday but still we did not get a settlement above $29/ounce. I am friendly as long as prices stay above $28 but I would like to see more upside and not this sideways action. After seven consecutive losing weeks, copper managed a positive close this week albeit only marginally. I maintain that prices are due for a bounce and have $3.44 followed by 3.54 as my targets.

Softs: Trail stops in cocoa but as long as the 50 day MA holds we could see prices track higher. Prices however are overbought so if you're not willing to give back any, book profits on longs. Sugar bounced with a vengeance Friday gaining 2.5-4.5% depending on the month. Prices hit their 50 day MA for the first time since early April. Re-examining the circumstances, sugar is still a buy. Traders that got out should look to re-enter. Though overbought on the daily chart, viewing the weekly and monthly we could have much more upside in my opinion. Cotton gained for the second week in a row but I’m expecting an additional 5-8% appreciation to follow. Trade accordingly.

Treasuries: 30-yr bonds and 10-yr notes are back above both their 9 and 20 day MAs. What this tells me is traders should be out of their shorts. I like the idea of being in cash and re-evaluating next week for a new position as well.

Livestock:  Live cattle closed near their lows on the week as prices may be on their way to their April lows. I have no current exposure but forced into the market I would be a seller. Feeder cattle continue to fail completing a 50%Fibonacci retracement. I think we get 61.8% which drags September to at least 156.25. Lean hogs broke hard Friday losing 1.5% to close at their lowest levels in 3 weeks. Can I say I told you so? I see another 1.5-2.5% loss to follow.

Grains: December corn in my opinion will trade under $5/bushel this coming week so I would be prepared to scale in corn to have some long exposure into the month end USDA report. Support was broken in July wheat so if you had not already taken your wheat off the market action should have taken you out of the trade. November soybeans finished lower on the week and I expect more to follow in the coming weeks. Depending on how much under $13/bushel prices get would dictate my buy zone in the coming weeks assuming I am correct.

Currencies: The US dollar lost ground the last 4 sessions and closed lower Friday than in the past 2 weeks. Prices are now below their 20 day MA and with Friday’s action we competed a 38.2% Fibonacci retracement. More downside is expected. More upside in international crosses as well…pick your poison. My favorites remain the Cable and Loonie.  

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