RCM Commodity Update: A Buying Opportunity In Crude Oil?

On its lows Crude oil completed a 50% Fibonacci retracement before reversing and closing 1.29% on the session. My opinion is we are now a buy dips market shifting from a sell rallies market just last week. I am friendly as long as $92.75 holds in August. Aggressive traders could probe bullish trade - see today’s chart of the day for further suggestions. RBOB closed off its lows but still in the re down almost 1% on the session closing with losses the last 3 consecutive sessions. I see limited downside from here but as opposed to outright longs I prefer playing the crack spread; long RBOB/short heating oil. Heating oil held its 61.8% Fib level Friday and today with a marginal gain today. I think on the way up RBOB outpaces heating oil, hence the crack spread. With the 0.79% loss today natural gas futures are back within pennies of last week’s support levels. Aggressive traders could probe bullish trade with a tight leash in August or September in my opinion.

Stock Indices: The 50 day MA gave way last week and today the 100 day MA was tested. While intra-day futures in both indices traded under that key pivot point we did settle above those levels. In the S&P the 100 day MA is 1567 and in the Dow at 14518. The next few days’ action is critical in determining the next leg. On a rebound expect the 50 day MA to act as resistance and on lower trade the 38.2% Fib level is your next support level… 1535 and 14165 respectively in September futures.

Metals: Inside day in gold with futures lower by 1.15%...the lowest settlement in 2013. The market looks overstretched where we should get a snap back, my only concern is one more wash out that could drag futures $50-75 lower so tread lightly. On lower trade I will likely buy back the bottom leg of my clients August option spreads and then play a bounce in the coming weeks to cut losses on the entire position. I still see it possible we see a $1350/1400 trade by this time next month. Silver closed lower by 2.33% but failed to make a new low as perhaps $19.25 is the line in the sand. I would not pile into silver however a buy under $20/ounce could be relatively close to an inflection point. I’ve started to price out September back ratio spreads.

Softs: A fresh 3 month low was established in cocoa today but I am very close to getting clients in bullish trade so shorts in my opinion should be looking for an exit window. The near 10% decline in the last 2 weeks was more than I anticipated but I see limited deprecation from here. Sugar has really gotten nowhere but prices have closed in the green 5 out of the last 7 sessions. Both daily and weekly charts are starting to look more constructive. Just to be clear I am not looking for a bull market to lift prices to 30 cents/lb. but just a rebound back near 19/19.50 in the coming weeks. The pain continues for cotton bulls as a reversal that took place in mid June has December back near 83 cents down 7% in 7 days. After hitting your objective traders should’ve lightened up. Hold the remainder of your trade as long as futures remain under their 50 day MA; in December at 85.25. Lumber looks interesting again grinding higher the last four sessions. What makes it attractive to me is the risk/reward dynamic as futures are within 4% of stiff support…stops under the recent lows. Fits and starts in coffee as September futures remain around $1.20. My stance is prices are very close to turning higher and not looking back but in full disclosure I’ve been saying that for the last dime decline. From a trade perspective I like long September and December futures with some sort of options as a hedge to protect from further downside.

Myself and one of my colleagues; Kevin Davitt have recently signed up a client; a former crop analyst for the USDA who has a PhD in Agriculture economics who will be trading softs and agriculture with RCM. He will be supply RCM and select clients with softs/Ag research. Please keep your eyes peeled in the coming weeks. Our opinion is softs/Ag is one of the most under covered commodity sectors and good information and actionable trade recommendations could give traders a huge edge.

Treasuries: A doji star in 30-yr bonds today with futures closing better than 1 1/2 points off intra-day lows. I am operating under the influence we rebound in the coming days/weeks. 10-yr notes too pared losses ending nearly 1 point off its lows. A rebound to 128’00 is my current stance. In 30-yr bonds a 38.2 % Fibonacci retracement lifts futures to 139’00. While a trade back to the down sloping trend line puts September at 137’10. I’m more eager to be a seller after this rally then attempting to catch this failing knife. The short end of the curve (Euro-dollars) has also overshot to the down side in my eyes. A trade back to the 20 day MA which is 35-55 tics in the 16’ contracts I’m tracking. I’ve advised clients to fade this rally and will be re-establishing bearish futures and option trades if the market delivers.

Livestock: August live cattle is finding resistance at its 61.8% Fibonacci level just under $122. I’m on the sidelines with clients here. Higher trade was rejected in lean hogs today as this has been the theme as all trades above 98.50 in the last 4 days have been rejected. I may be talking my client’s position but I think the bull’s gas tank is running on fumes. I like bearish futures trades hedged off with options. I see dead people - not just kidding - I see lean hogs 3-5% lower in the coming weeks.

Grains: On its lows December corn retraced 50% finding mild support at that pivot point. I’m looking for an additional 15-20 cents before buys are on my radar. I advised clients to close out their bearish August soybean positions at a very slight (2-3 cent) loss as I did not want to hold a losing bean position with just over 1 months time into this Fridays USDA report. November soybeans would need to be 30 cents lower to be on my bullish radar. Yea futures have come off 4.5% but I think there could be a further retracement. This may sound familiar as I’ve said it several times in the last 4 months. Buying December wheat near $7/bushel is a good risk/reward trade. Either selling puts, buying calls or even probing futures with stops under the recent lows...pick your poison.

Currencies: The US dollar met sellers above its 50 day MA as expected. I do not see September futures able to take out 83 on this leg. I have yet to buy the Euro, Pound or Swiss but bullish trade is on my radar…stay tuned. The Yen could go either way...regardless of the direction I would only play this by purchasing options...calls or puts I’m not sure? The commodity currencies may be at an inflection point as we are finding soft support in the Kiwi, Aussie and Loonie. Assuming we get a retracement in the greenback, stocks hold their 100 day MA, metal selling abates and energies bounce outside markets should support a rebound. The 3.5% decline in the Loonie in the last week was too much too quick in my eyes. A bullish engulfing candle in the Aussie today as we may have dodged a bullet for our clients in bullish trade. We are far from out of the woods but a settlement above .9260 in September would give us some comfort.

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.