RCM Commodity Update: A Reversal In Crude Oil

A reversal in Crude oil turned losses into a slight gainer finishing up a dime. The 18 day MA held with futures in September ending just under its 8 day MA. Slightly higher trade is not out of the question in my eyes but I remain a bear thinking we have more downside to come. I did advise to exit September outright puts today. The short October future against a put sale remains my favored trade. RBOB found support at its 18 day MA down better than 3.5 cents but 3.5 off its lows. $3.03-3.05 should contain upside in September contracts. Heating oil has traded lower 4 out of the last 5 days closing a dime below recent highs just under its 8 day MA. Like RBOB and Crude we found support at the 18 day MA. Will this continue? My objective in September futures is $2.94. Natural gas closed just off its lows down 1.51% at its lowest close in 1 week. I do not see stiff support for another 10 cents.

Stock Indices: Losses were pared in the S&P eking out a 0.25 point gain. 1690 remains resistance while support comes in just below 1650. The Dow too closed well off its lows but did finish slightly negative just under 15500. Upside resistance is seen at 15525 with support just below 15200.

Metals: Gold recovered 2/3 of its losses from yesterday finishing just under the 20 day MA. That level has proven to be a significant pivot point, in August futures at $1329. I am in the camp that we retrace lower but I was also in the camp of the dollar digging in its heels and energies and stocks moving lower so if these outside forces do not happen I can be wrong. A close above $1360 would also convince me I was wrong. Silver remains above its 50 day MA but until $20.50 is over taken I think prices leak lower. Palladium looks tired - any remaining bulls should book profits as a correction looks likely in the magnitude of $35-50.

Softs: For the last 5 days all trades above $2360 have been rejected in September cocoa futures. I’m expecting a 3-5% depreciation in the coming weeks. Sugar recouped yesterday’s losses closing above its 20 day MA for the first time since late June. If bulls can get some traction tomorrow do not rule out an additional 2-3% advance. I unfortunately cut losses on my clients October call options yesterday and only have a very small March 14’ futures long position with select clients. I see far better opportunities elsewhere. Back off bearish trades in OJ as a few tropical depressions could cause a spike short-term. Coffee re-took its 20 day MA gaining nearly 3% today. I think we get a trade above the 50 day MA in the near future which should cause additional short covering. I’m suggesting bullish trade in December with clients. The 50 day MA in this contract currently is $129.55.

Treasuries: Inside day in 30-yr bonds closing lower for the fourth consecutive session. Now with prices under their 9 and 20 day MA what was support now becomes resistance. The loss in 10-yr notes today puts prices at their down sloping trend line with a closing price on the 20 day MA. These instruments should move in the same direction and currently that looks to be a trade lower. Eurodollars have lost ground the last 3 sessions finding support at the 20 day MA today. Scaling into bearish trade in 16’ contracts after the recent run up remains my advice.

Livestock: Live cattle did finish in the red but lower trade was rejected with October closing a penny off the intra-day lows. As long as the upside is capped by the 9 and 20 day MAs I prefer bearish trade. Higher trade was rejected in lean hogs. I will talk to August contracts because that is where my clients are trading but fresh entries should look towards the October contract. As for the recommended trade...buy back your 96 puts (the hedge) and put a stop just above the highs. If we are lucky futures roll over and we look to make money on both legs…stay tuned.

Grains: Favorable weather and heavy farmer selling has contributed to a bloodbath in Ags of late. December corn is down 9% in the last 2 weeks dragging prices to their lowest levels since October 10’. The biggest loser has been soybeans and until legumes find their footing expect more pressure in the complex. Old crop beans are lower by 11% in the last 3 days with no bottom in site yet. New crop appears to have stiff support about 30 cents under current trade. In the last 3 days this contract has given up 5%. Wheat appears to be the best house in the worst neighborhood getting hit the least. Unfortunate for my clients who are in bullish trade, long December futures and short out of the money calls. Needless to say they are down on the trade with futures off 5% in the last 2 weeks. We are seeing good exports around current trade so I see limited downside.

Currencies: The US dollar traded to its lowest level since 6/20 off by .42%. We should see muted action until next week’s Fed meeting and NFP # in my opinion. I think the bulls dig in their heel and we experience a bounce from current levels. Those probing bearish trade in the Euro, Swiss and Pound should have been stopped at a small loss. Yesterday’s chart of the day was short the Loonie...re-read the post to get specifics but it is a bearish recommendation. Today’s piece I touch on the Yen and I think made a compelling case to have bullish exposure anticipating higher trade in the coming weeks.

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