Crude: Too High, Too Quick; Natural Gas Picking Up Steam

Crude is approaching the $104 level as forecast in recent posts. We’ve advised clients to start liquidating longs after an $8 run in the last two weeks. I think all the activity in Iran has taken Crude too high too quick…just my opinion.

The fact that the distillates are not trading higher alongside Crude also supports my thesis that prices may be over-stretched. Natural gas has picked up steam the last two sessions poised to trade above the 40 day MA for the first time in 5 months. A trade above $2.85 in March that holds would convince me a bottom is in and longs are trade able. Until then I have no interest.

Stocks are trading near four year highs but probing to pick a top was non eventful this week as  a false break down was exactly that, false. I am uncomfortable advising longs and will not try calling a top again. Stand clear until we see consecutive settlements below the 9 day MA. For the Dow that's 12835 and for the S&P, 1348.

After five positive weeks gold had closed lower the last two weeks. I remain in the camp that says prices come lower…as I said Thursday, a settlement over $1740 would signal higher ground. Cut losses on the bearish trade. Silver has traded lower seven out of the last eight sessions. Even though prices are only $1/ounce off their recent highs, I see more downside. Next support in March is seen at $31.50 followed by $29.75.

Copper was lower every day this past week losing nearly 7% in that time frame. I’m expecting an additional 4-6% correction which would complete a 50% Fibonacci retracement  on the move in the last five months…trade accordingly.

Finally a positive showing in coffee after seven straight losers. Do not expect much more than a bounce before the onslaught resumes. Live cattle continues to march higher…unfortunately without my clients on board. We have been bullish for months but jumped off this train albeit prematurely. Clients should wait for a pullback to get long.

Lean hogs also were slight gainers running into resistance at the same level that capped further upside weeks ago. On a trade back near 88.00 cents in April we suggest probing longs.  Buyers are emerging in grains but until prices correct I am a spectator with clients.

The yen should continue lower but all other crosses appear to be consolidating so I see no long or short opportunities at the moment…move to the sidelines. Looking at longer term (weekly and monthly) charts in the yen this could just be the beginning.

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