Commodity Wrap: 2012's Early Standouts

It is still very early in the year but let me point out a few standouts:  YTD natural gas is lower by 22%, silver is higher by 15%, cotton higher by 7%, OJ is at record highs up 24%, wheat is lower by 8.5% just to name a few.

Crude is trading just below $98.50 in March near the weekly lows. A close below this level would turn me bearish…trade accordingly.  The next significant support comes in below that level at $94/barrel. It is too early to say for sure but it looks like the distillates reached an interim top this past week as well.

Both heating oil and RBOB could back off 10-15 cents/gallon very easily in my opinion. The sentiment clearly remains bearish but as more investors continue to bash natural gas, that is when it will likely bottom. It's just like any market, when the boat leans one way too much it generally tips. That being said, we’ve refrained from buying but when natural gas bottoms expect some serious short covering.

Stocks have only closed lower two days so far in 2012 so I remain bullish, but the pace of buying is starting to fade. I remain bullish as long as the 9 day MA supports.

That level is 1295 in the S&P and 12460 in the Dow. Gold nearly picked up 1% closing above the 40 day MA for the third session in a  row. The 50 day MA needs to be overtaken this week or we would move to the sidelines, that level is $1674.

Silver was the standout Friday gaining over 5%, lifting prices to five week highs and cutting through the 50 day MA like a hot knife through butter. Next I see the March contract eyeing the 100 day MA at $33.15.

The dollar has finished lower only four of the last twelve weeks but this past week was the biggest losing week since mid-October. It appears, at least in the short run, prices should head further south. The standout Friday befitting from dollar weakness was the Pound and in my opinion there should be more upside to follow.

The commodity currencies reversed and made new highs so back off being a seller. Further commodity appreciation could mean a higher Loonie, Kiwi and Aussie.

Fresh entries long cocoa should have been stopped at a loss as prices are back under the 50 day MA. Add to longs in sugar on a  close above the 100 day MA, that level is 25.15 in March.

30-yr bonds and 10-yr notes closed out last week at the bottom of the recent trading range. As previously stated, though forced by the market I am a seller but do not wish to be, as lower in equities (which should come soon) will likely get Treasuries appreciating again.

I'm still on the sidelines in grains, thinking we can get clients positioned long on a test of the December lows as long as the 20 day MA supports April lean hogs and live cattle remain in bullish trades. In case of a breach, move to the sidelines.