RCM Commodity Update: 5.39% Jump In Silver

A lower high and lower low as Crude oil is trading about $2 off Friday’s high. I am operating under the influence that an interim high was obtained last week and we'll get confirmation on a penetration of the 8 day MA in the coming sessions…in September at $106.15. I see support under that level at $103/barrel followed by $100. I’ve suggested bearish trades to aggressive clients…purchasing September puts, short October futures against puts 1:1 or long Brent/short WTI. If my analysis is correct in Crude I would expect the products to trade south as well. Trades above $3.06 have been rejected in RBOB with futures just above their 8 day MA as of the close yesterday. A trade back to the 18 day MA puts September closer to $2.90/gallon. Heating oil has lost ground the last 2 days as I expect a trade under $3.00 in the coming sessions. A 50% Fibonacci retracement puts September back near $2.94. Natural gas was off better than 2%, finding support at its 18 day MA. We could see $3.85 or $3.55...neither would surprise me so stand aside for now.

Stock Indices: The S&P was a slight gainer while the Dow a slight loser. Are the bulls getting tired? The path of least resistance remains up but hedges on large stock portfolios remains my advice. On a speculative trade some clients are in back ratio spreads in September contracts. If we do not see signs of a corrections soon I will likely advise cutting losses.

Metals: Today’s chart of the day was gold. Gold gained 3.19% to close at its 20 day MA. $1300 now becomes support and as long as we hold that support level higher trade is a reasonable assumption. The pace of appreciation should slow though as we are approaching overbought levels. Next upside target is $1355 followed by $1400. Though the 3.33% gain was impressive in gold, how about the 5.39% jump in silver lifting futures decisively above the $20/ounce level. A close above $20 put futures at their highest levels since 6/20 with little upside resistance seen until $21.25-21.50. If we see a hesitation near those levels I would book partial profits on fresh entries that we’re established under the $19 in recent weeks.

Softs: Cocoa closed lower for only the second day in the last ten sessions giving up 0.68%. I am a seller for clients near current trade, expecting a trade back near the 50 day MA approximately $90 lower. Sugar closed higher yesterday for the fourth day running and 5 out of the last 6 days. Futures must take out the 20 day MA to see any short covering in my eyes but on that I am targeting a trade near 17 cents in the October contract. I’ve played this with select clients, buying October calls. OJ finished higher by 1% but better than 1% off its highs. Those that have enjoyed the most recent 20 cent appreciation should be offsetting bullish trade IMO. I have bearish trades on my radar and will have ideas in the coming sessions. Lumber gained the daily limit higher by $10. I anticipate a grind higher and remain in the bull camp as long as futures maintain $315. On the lows, coffee was nearly 12 cents off last week’s highs and being the 20 day MA has held the last 2 session and we may experience weather issues in the coming sessions I think probing bullish trade is the appropriate strategy. I gave clients some bullish trade ideas in futures and options.

Treasuries: Yesterday’s high trade was 136’00 in 30-yr bonds. See previous posts as that is the next upside hurdle in my eyes. A mild setback may happen but as long as the 9 and 20 day MAs hold I am in the bull camp. That support level in September futures is seen at 134’20/134’22. A trade above 136’00 should lead to a trade near 138’00…trade accordingly. 10-yr notes closed off their highs but still remained in the green for the session. A trade higher remains my call as long as futures maintain their 9 and 20 day MAs, at 126’17 and 126’07.5 respectively. Eurodollars remain stuck at their 38.2% Fibonacci level. Short-term we could see 10-15 tics in either direction but medium to longer-term I am a bear. My favored play is short futures and long calls 1:1 in 16’ contracts.

Livestock: October live cattle gave up 0.50% to close under their 9 and 20 day MAs. I see stiff resistance at $126.70 and expect a grind lower. A 50% retracement puts this contract back at $124.30. August lean hogs gained 0.67% and traded close to 98 cents near 2 week highs. I will be forced to cut losses on bearish trades in the coming sessions if weakness does not return. A settlement under 95.70 is needed to keep me in client’s bearish trades the next few days.

Grains: Trades under $5/bushel appear to be rejected in new crop corn. A relatively low risk trade idea in my eyes is probing December corn with stops under the recent lows. Also last week I advised some clients to buy bull call spreads in September corn. Old crop and new crop soybeans were the standout yesterday with August higher by 1.98% and November by 1.14%. A trade above $13/bushel looks likely in the coming days. As long as $12.60 holds, one should be friendly...in full disclosure I have no client exposure. $666 is your line in the sand in December wheat…challenged again yesterday. Will that number prove to be an inflection point? I’ve suggested long futures and selling out of the money calls 1:1.

Currencies: The US dollar started the week on the ropes giving up 0.48% closing at the lowest levels since 6/21. The easy money has been made on bearish trade but with prices under all MAs I use for FX trading it will take a trade north of 83.00 for bears to give up any control. The Euro and Swiss traded to the highest levels in 3 weeks and more upside looks likely. The Pound is within tics of completing a 61.8% Fibonacci retracement and limited upside is seen in my eyes. On a spike higher I will be probing bearish trades…stay tuned. With energies moving lower and metals moving higher a tug of war exists in the commodity currencies. I am mildly optimistic on these 3 crosses…forced to pick one the Loonie. The Yen is back above par probing its 50 day MA. Aggressive traders could buy call premium but I would not trade futures in this instrument.

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.