Commodity Wrap: Bulls Still Driving Metals, Bottom on Natural Gas

I misread the recent action and thought we were approaching a turning point, but now it appears the markets were just taking a breather and now the underlying moves are back on track, so trade accordingly.

Crude appears to be finding its footing as further sales are being rejected. With a settlement back above $100 I would become more friendly. On a  close above $102 in March I then would be looking for buying opportunities  thinking we might get a new high…trade accordingly.

I say a bottom is in on natural gas and aggressive traders can be long.
On a false start I would not hold it back to the bottom but a stop just below the 9 day MA would be my suggestion. Prices have already jumped 23% off their lows.

In the coming weeks I could see a further 50-75 cent appreciation. Can you say short squeeze? The 9 day MA supported a trade lower yesterday morning only to end at fresh highs. I remain impressed but I still think we see an interim high very soon so I would start trimming your positions. I am not getting bearish just advising booking profits on longs.

I had expected metals to back off but clearly after yesterday’s action the bulls remain in the driver’s seat. Gold traded above the 100 day MA for the first time in seven weeks and now has completed a 50% Fibonacci retracement. Just above $1750 in February is the 61.8% Fibonacci level.

Silver is above its 100 day MA the first time since mid-September when prices collapsed from above $40/ounce. I expect prices to get back near $37 but not before a correction. However, at this point we may juice prices a  bit higher. I am holding out for new entries for clients under $30/ounce.

The dollar continues to drop, losing 0.50% as of this post. With dollar weakness comes strengths in other crosses. The commodity currencies were the best performers with the euro and Swiss slightly behind.  Signals point to higher trade in crosses and lower in the dollar. I unsuccessfully recommenced picking a top in the commodity currencies and traders  should have been stopped at a  loss.

Cocoa should continue to work higher on further dollar weakness; 2500 in March is the 100 day MA. Use that as your target when evaluating risk to reward.

Cotton is on sale with stops above the recent highs. If coffee breaks the recent lows, expect $2.00 to be breached in March.

The sentiment is bearish in Treasuries and if you notice yesterday the 20 day MA rejected further upside. That level continues to be your pivot point; in 30-yr bonds at 143’6 and 130’24 in 10-yr notes. 2013 Euro-dollars are at fresh contract highs. Let them work higher and we will be looking for bearish entries on a sign of an interim high.

Corn and wheat closed back over their 20 day MAs. Ag traders can scale into longs expecting further upside.  My suggestion would be to build a long position and to stagger stops behind the market.  Trail stops on longs in live cattle as a new contract high was rejected and do not rule out profit taking. Lean hogs were slight gainers. Stay long and run stops just under the 20 day MA.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.