Commodity Wrap: Equity Turning Point on the Way?

A market turning point is coming. Not today and probably not tomorrow, but I would expect the equity market to give back its recent gains in the very near future. What that likely means is money out of stocks and into Treasuries and commodities. That's just an opinion.

Crude remains in no man’s land as prices could go either way in my opinion. My bias is leaning to the bullish side but I would prefer to be  a buyer on breaks. For instance, I see solid support in March just under $94/barrel, so long entries closer to that level sound extremely appealing.

In two sessions, natural gas has leapt 15% with a close back above the 9 day MA yesterday for the first time since early December. It is too early to call a bottom, but a spike in volume and the capitulation we got are precursors for a bottom being established, so stay tuned.

Another gain yesterday in equities but the pace is waning with prices higher by 0.25% on average. I know it is a broken record but expect higher ground as long as the 9 day MA holds. An FOMC decision today could derail the ascent so stay alert.

Gold closed back under the 50 day MA giving up 0.75% yesterday.
Weekly charts still look supportive, but the daily screams overbought. $1650 in February will need to hold or I would move to the sidelines. For the first time in five sessions silver failed to make a new high on an inside day. Like gold, the weekly chart still appears to show that we have more upside but prices have started to roll over on the daily chart. I say lighten up or tighten stops as we may be close to an interim top.

The dollar index failed to make a new low, but as long as prices remain below the 50 day MA I remain bearish; that level is 80.10 in March. The euro and pound remain buys while the commodity currencies appear as if we could see a retracement. Trade accordingly. The yen broke down yesterday breaking all short term MAs. I am expecting a move back under 1.2600 on this leg.

Cocoa bounced off the 50 day MA surging almost 7% yesterday lifting prices to two month highs. Try timing a long entry again by buying a dip and placing stops just under the 50 day MA. Corn was higher by 1.7%, while wheat added 2.2%. I’m comfortable buying dips in either Ag product, placing stops under the recent lows.

I think in the coming months we could see March corn above $7/bushel and wheat closer to $7.50/bushel. April live cattle is on the verge of making new contract highs having appreciated 4% in the last two weeks. It has been a nice run for bulls but there is no reason to believe prices should not see higher ground. April lean hogs are running into trouble at the same resistance level that capped upward momentum in late December. That being said, as long as the 20 day MA holds at 87.30 I remain friendly.

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