RCM Commodity Update :

recouped the previous 2 days of losses higher by 2.25% as of this post and above its 8 day MA. This was a sharp reversal trading virtually $3 off yesterday’s lows. Those who are short futures should have some sort of options protection and I will likely look to lift protection in the coming sessions with my clients…stay tuned. I will stay the course in futures and either let go of the October puts or September calls. The Brent/WTI spread came in better than a $1 - use this move to layer into the trade if not already exposed. Lower trade was rejected in the products with RBOB and heating oil bouncing off their respective 38.2% Fibonacci levels currently trading 7 cents and 8 cents off intra-day lows. We could see the levels from 2 weeks ago challenged but I see limited upside beyond that at this juncture. I will be looking for an opportunity in the crack spread but am currently flat in products at the moment. A potential double bottom in natural gas just above $4.40? The temperatures have been cooler of late so the demand has been lackluster but this is likely factored in considering the recent price action. I started to probe some bullish back ratio spreads with some clients today in October and November.

Stock Indices: Higher trade was rejected with the S&P closing on its lows. Only a 4.25 point loss but nearly 14 points off intra-day highs. No real surprise as the can continues to get kicked down the road. Now we wait for Friday’s jobs number for the next catalyst. As long as 1700 is not penetrated I think the much anticipated correction is around the bend. Same tune in the Dow finishing 150 points off its highs lower by 60 points on the day. All trades over 15,525 continue to be rejected. On a retracement both indices should be met with support around their 50 day MAs, currently at 1640 and 15165.

Metals: From breakfast to lunch gold gave up $25 only to reverse higher on the Fed to trade $25 higher before settling in near the middle of the range losing $11/ounce on the day. The 50 day MA continues to act as upside resistance…currently at $1326. I have a sneaking suspicion that we have work to do on the downside as I am targeting $1250 in December futures in the coming weeks. A 75 cent trading range in silver with futures ending in the red by a nickel closing just under the 20 day MA. A settlement below this pivot point for the first time since 7/18. Prices need to retake $20/ounce on a closing basis or I say we challenge the 13’ lows 7% below current trade.

Softs: Cocoa is finding support at its 20 day MA, in September at 2279. After a quick $120 sell off I can see the market gasping for a breath but I remain in bearish trades and have advised clients to fade rallies still thinking we push lower. Dips were bought in sugar as early losses were reversed. Futures did not trade low enough for fresh entries. I’d like to see a trade near the 20 day MA when I’m not sleeping in 14’ contracts. OJ gave up just better than 1% to close lower for the second consecutive day. Today’s chart of day was OJ. I think bearish trade makes sense as I expect a retracement of 7-10% in the coming weeks. Coffee traded within 30 ticks of the June lows giving up 1.70% and in the red for now four consecutive sessions. On signs of buying interest I will be willing to let go of some of my option hedges against my client’s long December futures in the coming sessions…stay tuned.

Treasuries: In early dealings it appeared like today was going to be a bloodbath in Treasuries but lows were made around breakfast and 30-yr bond futures ended just less than 2 points off their lows. Until futures retake their 20 and 9 day MA I am not a believer…those levels are 134’9 and 134’13. Lower trade was rejected in 10-yr notes as well and just looking at the close it would appear a non-event but with a 1 point plus trading range that does not tell the whole story. The 9 day MA has been challenged the last 4 days but has served as resistance. It will take a trade north of 126’19.0 to see further upside. Eurodollars closed off their lows but still in negative territory. I still think the best strategy here is short futures against a purchase of a call options 1:1 in 16’ contracts.

Livestock: August lean hogs are finding mild support at their up sloping trend line but today and yesterday futures failed to get above their 9 day MA .As long as that level contains further advances I like bearish positioning. Fresh entries should be trading October futures and could hedge off with the sale of put options 1:1. I will be in the bear camp as long as this contract is below 84.75.

Grains: Corn put in two positive days but futures really have not gotten anywhere just 8 cents off recent lows. Do not get too excited as we experienced two successive positive days last week that led to nothing. A trade above the 9 day MA would have me thinking a trade above $5/bushel is in our future. The 9 day MA in December is currently at $4.83’2. A sub $12 trade was rejected in November soybeans with future able to retake that level closing at $12.06’2. If corn and wheat can muster a move north I expect this rising tide could lift all boats. A 38.2% Fibonacci retracement in this contract puts November beans back at $12.45’4. Wheat gained for the fourth consecutive session closing above the 18 day MA for the first time since 7/12 when prices were 2.4% higher. I am targeting a trade back to the 50 day MA which on the December contract is at $6.90/bushel. My suggested strategy is long futures while selling an out of the money call 1:1.

Currencies: The Pound closed well off its lows as trades under the 20 day MA were rejected…however in early dealings near the lows traders were able to take their bearish Cable trades off at profit of 50% based on my chart of the day yesterday (options strategy). A bullish engulfing candle in the Swiss and Euro so those probing bearish trades should have been stopped at a loss. Tomorrow in early US trading we have the ECB and BoE so do not rule out fireworks tomorrow. A fresh high in the Yen and while the market looks tired as long as we maintain the 50 day MA stay in bullish trade targeting $1.0350. A bullish engulfing candle in the Loonie as well closing just off its highs and 61.8% Fibonacci level. The strength in energies likely contributed. Those short should be willing to take a small loss if we trade closer to .9800. With all the upside in the FX space one would think the US dollar traded lower and indeed it did forming a bearish engulfing candle and trading to the lowest trade since 6/20. While I cannot rule out a challenge of the June lows 1.2% from current levels I see limited downside but maybe my goggles are foggy?

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.