RCM Commodity Update: Crude Oil Higher

is higher by 1% as of this post retaking its 8 day MA. I do not see July above $87 before a meaningful correction so fade rallies until that level is taken out. I anticipate a trade back near $92/barrel in this contract…trade accordingly. For the last 3 sessions RBOB has put in higher highs and higher lows inching higher. We may grind to last week’s highs roughly a nickel higher but I see that short lived if the market musters a rally. Heating oil found support at its 50% Fib levels registering the highest % gain in the energy complex appreciating 1.85% today. A settlement above the 50 day MA may lead to a probe of the 100 day MA, in July just under $2.99. Higher trade was rejected in gas today which may prove to be a reversal day with a settlement in natural gas 3.4% off its highs. A breach of $4.15 should lead to a probe under $ in July.

Stock Indices: With over a 200 point range in the Dow and near 30 point range in the S&P indecision is setting in. Higher trade has been rejected 2 out of the last 4 days while lower trade was rejected in the other 2 days? Unless 15525 and 1680 are taken out very soon I think prices roll over and we see the long awaited 5% plus correction. For investors with large security allocations my suggestion is instituting a partial hedge to protect from such a trade south.

Metals: Gold continues to meander around, 9 day MA trading off 0.40% today. The recent consolidation over the last week appears to be an ideal entry point to probe the waters for long entries. I am not calling a bottom but rather just see a good risk/reward trade thinking the recent lows hold and we can experience a $50-70 pop in the coming weeks. My suggested play is August options…contact me for precise strategy. $22 continues to act as the line in the sand though I’ve established no fresh entries in silver as I have yet to get a clear picture. I think we could see futures move $2/ounce in either direction at a moment’s notice…stand aside for now.

Softs: Cocoa continues to slide with July futures giving up 1.83% dragging prices within $15 of completing 61.8% Fibonacci retracement. I’m bearish until we see a trade north of $2275. Sugar only gave up 0.71% but on a bearish engulfing candle on the daily chart. Let’s see if fresh lows are established in the coming session…stand aside for now. For the last 6 days cotton has closed in the red and I do not expect that to change in the immediate futures. Buyers failed to hold onto early gains and an 80 cent trade still appears likely in July. With the loss in coffee today we continue to grind lower with futures approaching 3 year lows. I have been working into bullish trades on this weakness but as I tell my clients keep your size very small until the market confirms a bottom. I think selling is limited at current levels.

Treasuries: The Treasury complex was hit today with more talk of tapering among debt traders. Whether this is reality or not the entire complex has unwound gains from March and April so far in the month of May as futures are fast approaching the lows from early March. Unfortunately I have a small position in NOB spreads with some clients so today we took some heat. We lose the move in 30-yr bonds and make the move in 10-yr notes so as of this post the spread moved just over 1 point or $1,000. On a fresh low I will either leg out or cut losses…stay tuned. In June futures that would mean a trade under 140’14 in 30-yr bonds and 129’19 in 10-yr notes. On a positive note read today’s chart of the day as we are seeing massive moves in long dated Eurodollar contracts. This could be the beginning of a trade I have preached about for several years.

Livestock: Live cattle remained above their 9 day MA today but are not trading as I anticipated. I advised clients to take off at least half of their bullish trades until we see evidence that a bullish move is underway. A settlement above 121.00 in August would confirm that the recent lows are likely an interim bottom. September feeder cattle are starting to find buying interest under 146.000…stay tuned. Lean hogs probed 3 1/2 month highs as prices have gained 4 out of the last 5 sessions 2.2%. Higher trade looks likely but I’d prefer a dip to establish fresh positions, perhaps August closer to 89 cents.

Grains: China purchases contributed to the gains in soybeans today with old crop up by 2.25% and new crop for a change out pacing old crop advancing 3.25%. In the month of May alone new crop is up almost 7% but a trade above $13/bushel could lift price to fresh 13; high in my opinion above 413.50. Forced into the market I would be a buyer on dips. Wet weather over the weekend in the Midwest was the major culprit that aided in the 2.7% advance in new crop corn that gaped higher and close at 3 week highs. The gap from early May was filled on the upside. I continue to like bullish trade though expect choppy two sided action. My first objective in December remains $5.70/bushel. Wheat was the laggard today, outside of rice it was the lone negative trade in the Ag complex. Wheat will continue to look for guidance from corn and other outside markets. At current levels I am comfortable with the risk/reward dynamics and prefer scaling into bullish trade in new crop.

Currencies: The almighty buck registered a win today as all other major crosses were in the red. I see 84.50 in June futures as stiff resistance in the dollar index and still have an objective of the 20 day MA…currently at 83.30 in June. The Yen has been meeting stiff resistance at the 20 day MA for the last 3 days but I expect that to be temporary as I am calling for a trade to 1.01050 in the coming weeks. The only open currency position I have for clients is bullish trade in the Aussie. They are long futures and sold calls 1:1 against their position. They are down in the trade but I think a trade higher in the coming weeks lifts prices north of par so stay the course.

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