Commodity Update: To The Rescue

Yesterday marked the third consecutive positive session in Crude oil as prices are currently $4 off lows from earlier this week. My take is an interim low is in place and we grind back to $90/91 in the coming weeks. Trade accordingly. RBOB is nearly 4% off its lows from Monday and with a trade above the 8 day MA at yesterday's high we should be off to the races. I am expecting confirmation this week. Heating oil has gained just over 5% in that time frame; I see a reversal in this distillate as well. Natural gas is having trouble clearing the 8 day MA ...this pivot point was serious support for much of May now the roles have reversed and support has become resistance. To reiterate my recent posts, I expect a trade higher and have advised the sidelines.

Stock Indices: A rally is underway as stocks roared higher yesterday gaining 2.25-2.5% lifting prices just shy of their 20 day MAs. I expect more to come and as prices get through this pivot point I see the next resistance level at the 9 day MA; in the Dow at 12775 and in the S&P at 1355. I’m not interested in buying but selling at those levels if we reach them sounds appealing to me. Stay tuned.

Metals: Gold settled above the 50 day MA for the first time since mid-March when prices were approximately 5% higher than current levels. A 38.2% Fibonacci retracement is compete and investors that listened to my recent buy recommendations should be satisfied with this leg. This to my eyes is just the beginning as I think we see $50-70/ounce more relatively quickly. Hi ho silver as prices were higher by nearly 4% yesterday lifting prices in silver near one month highs. I see $29 as support with $30.50/31 as an upside target. These moves will not be straight up, so make sure you monitor you positions and manage the trades. Platinum has advanced 6% in the last week and this could be just the beginning in my opinion. Even copper has joined the party trading positive for the first time in six sessions. I anticipate a bounce into next week. My targets in July are $3.45 followed by $3.55.

Softs: Cocoa is on the move as prices have appreciated just as forecast in previous posts. The action in the pound and dollar support further appreciation. I expect 4-6% further in the coming weeks. Sugar recouped two weeks worth of losses on yesterday’s gain with a close of 3-4.4% depending on the contract. Buy dips as the interim low was likely made. A 38.2% Fib retracement puts July futures over 21 cents. After a near 30% decline in the month of May alone cotton was due for a rally and yesterday may be day one. Not taking a buy signal but rather let’s see how much of a bounce the market can deliver so we can sell from higher levels.

Treasuries: Treasuries were clipped yesterday with 30-yr bonds and 10-yr notes getting hit hard. Both contracts closed under their 9 day MAs which for me is confirmation of an interim top and reason to gain bearish exposure. This is expected to be a bumpy road but I think we see this complex under pressure in the immediate future. My target in 10-yr notes is 131’00 and in 30-yr bonds 144’00. Refrain from Euro-dollar exposure as I view the long end of the curve as a better shorting opportunity than the short end as of right now.

Livestock: Walk away from any trades in live cattle until there is a clearer picture. If feeder cattle close under 159.00 I would say prices are headed south again. My target, if we see that play out, would be 156.00 in the September contract. Lean hogs are overbought and due for a correction in my estimation. I’m more interested in buying a break than gaining bearish exposure. Stay tuned. A trade under 81.00 in October would have longs back on my radar.

Grains: Grain traders could be probing longs in maize but let’s jump out to the December contract and trade new crop. As long as $5 holds on a closing basis in this contract I’m friendly. Not sure if it’s a bottom but I’m sure it is support as wheat has failed to breach $6.10 on the July contract on multiple attempts. As a trade, buy close to that level with a stop just under. Great risk to reward as we could see a 20-30 cent bounce relatively easily in my opinion. Soybeans could bounce with the whole complex but I like soybean oil more than soybeans even though a rising tide will likely lift all boats in Ag. Those willing to be long July beans should be supported at $13.40. Soybean oil is a buy as of this post. Prices are back over their 9 day MA. I’m expecting a sharp 5% appreciation from current levels and though we’re not timing the bottom we are close enough in my estimation. Stay long if July remains above 48.00.

Currencies: The dollar lost 0.64% yesterday dragging prices to one week lows. In my opinion, this is the beginning of the leg lower I forecast in recent posts. A 38.2% Fibonacci retracement puts the June contract back at 81.40. The yen remains a sale as the 20 day MA was breached in overnight trading last night for the first time in 2 weeks. Expect lower trade as commodities and equities appreciate near term. The commodity currencies and European currencies should see higher ground near term. Those late to the party, my favored play is the loonie as it remains very sensitive to energy and metals and I expect a solid appreciation near term. Trade accordingly.

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