RCM Commodity Update: Crude Oil Closes At 2-Week High

bounced off its 50 day MA gaining 1.36% today to close at 2 week highs. I repositioned clients in bearish trades and booked profits in their August call hedge and bought July in the money calls against their August futures. I still believe we trade south but if we settle above $97 in July I would likely cut losses. We are under water just better than $2 on the futures contracts. I closed the heating oil/RBOB spreads at about my entry…small loss or gain depending on their fill. I would like to get back in the trade once Crude starts moving south. With natural gas under its 100 day MA my bias has shifted from neutral to bearish. That pivot point is $3.92 in July futures.

Stock Indices: Fasten your seatbelt. We moved down 50 points only to reverse and trade higher by 50 points in the S&P the last 4 sessions. The 50 day MA was tested and held yesterday. That pivot point will remain the line in the sand; June futures at 1603. While we may tread water or even get a bounce I am not convinced the selling is over…stay tuned. All clients’ bearish ES trades were closed out on Wednesday so while we missed some profit we are happily on the sidelines. The Dow closed 90 points higher on the week which seems like a yawner but anything but with close to a 500 point trading range on the week. The pivot point in June futures currently lies at 14900. The Nikkei likely hit a tradable bottom bouncing off the 100 day MA today advancing 4.09% today. Perhaps a dead cat bounce but shorts should be out or have reversed in my opinion.

Metals: The 40 day MA capped upside in gold futures again today with futures closing down 2.32% near 2 week lows. Some of my clients chose to close out their August bullish option plays at a $1300-1400 loss per. I want to give it a few more days but today’s action was anything but bullish. I had expected one more advance before we dive south and we may not get it…stay tuned next week. Silvergave up 4.25% to close at its lowest level in 2013…not its lowest trade but its lowest settlement. With a breach of $22/ounce more selling should follow. Looking at a weekly chart I am eyeballing $21 followed by $19.

Softs: Cocoa gained 8% on the week closing higher all 5 sessions. I advised bullish trades to book profits though I would not rule out a test of the early May highs. If we challenge those levels and fail I may probe bearish trades…stay tuned. Sugar may not be a buy yet but selling is abating so I’m starting to pay attention again. Cotton gained 4 out of 5 sessions this week but the 50% Fib level capped upside on all attempts. If that continues into next week expect bearish trade recommendations. Coffee finished lower for the fourth consecutive week though there has been minimal downside the last two weeks as prices seem supported just above $1.25. I continue to advise accumulating bullish exposure in September and December contracts.

Treasuries: 30-yr bonds held their lows but ended the week on the lower end of the recent trading range with the advance in the equity market today on an optimistic jobs number. 139’00 will need to hold in September futures or we will likely see another leg lower. 10-yr notes also gave up ground after trading higher 3 out of the prior 4 sessions. 128’20 will need to act as support in September futures in this instrument. NOB spreads were hit today 21.5 tics. I would like to see a bounce to establish bearish trades in 16’ Eurodollar contracts but I will sell at lower levels if it looks like we will continue to slide…stay tuned.

Livestock: Live cattle closed marginally lower on the week but with prices under their 9 and 20 day MAs I am in the bear camp. Close out bullish trade and buy lower is my advice. Those probing lean hog futures may have gotten stopped out as prices in August advanced 1.7% on the week closing at 4 month highs. My clients in bearish pig trades entered bearish trade by selling futures and selling out of the money put options 1:1. We think prices back off 3-5% in the coming weeks so are willing to take a little more heat.

Grains: December corn retook its 9 day MA closing nearly 20 cents off Thursday’s lows. Though we had a partial fill of the Memorial Day gap I am not ruling out a total fill in the near future. While I want to be bullish in the medium term I think it would be constructive to experience a little more downside. Closer to $5.30 bushel I would be willing to probe futures and sell $5 put options. Long wicks in the candlestick charts on August soybeans with higher trade being rejected on three separate sessions. I like bear put spreads in August soybeans thinking we could correct 50-70 cents. Today’s chart of the day is a corn/soybean ratio spread…read it as I think it has a great risk/reward dynamic. With corn and beans finishing in the green it was disappointing to see wheat end in the red though just over 1 penny lower. The 50 day MA supported on all attempts. A leg higher is still my call in the December contract in the coming weeks.

Currencies: The dollar has finished lower the last 3 weeks. The 61.8% Fib level appears to support just above 81. We likely will get a bounce into next week but I don’t see the 50 day MA being taken out at 82.90. The Euro, Pound and Swiss may have reached an interim top…tighten stops on bullish trade. On its highs today the Yen completed a 61.8% Fibonacci retracement trading at 2 month highs. Book profits on remaining bullish trade. On my radar is an FX spread that may have reversed overnight…let’s explore next week…long Aussie/short Yen. As for outright bullish trade in the commodity currencies the Loonie appreciation is underway gaining 1.5% the last 2 days ending the week at its 50 day MA. The Aussie has been a brutal long trade but I still think we get a shot of rocketing north from current levels… stay the course if you have the stomach.

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.