RCM Commodity Update: Expect A Decline In Crude Oil

Higher trade was rejected in Crude oil and with the dollar up 1% today I would expect a reversal very soon. I’m not looking for a collapse but rather an orderly $3-5 decline…trade accordingly. Both heating oil and RBOB probed their 100 day MAs but products should retrace if my assessment is correct with Crude. A $4 correction in Crude should equate to a 10-15 cent break in the products. Natural gas has gained the last 3 sessions and 5 out of the last 6 sessions. We did close above the 18 day MA today for the first time since 5/29. I do expect higher trade but I advised energy traders to exit 75% of their position today as I would rather be short Crude than long natural gas into tomorrow AGA. Those still in the trade should get another 10-15 cent appreciation in my opinion.

Stock Indices: Blame it on the Fed if you will but stocks were hit today - the S&P off 1.31% and the Dow 1.29%. On a breach of the 50 day MAs expect the flood gates to open or maybe a better analogy look for the rats to scurry out of the small opening on the other side of the room, far from orderly. Those key pivot points come in at 1610 and 14925 respectively. On that the 100 day MAs should be your next stops 1565 and 14500. Trade accordingly…more importantly HEDGE.

Metals: As I said yesterday all trades under $1350/ounce have been rejected in the last 3 months, this was the case today. August gold traded as low as $1348.30 but ended the session at $1374 just off the highs. Perhaps a key reversal…it does not appear so as overnight futures are off nearly 2%. If we do not see buying tomorrow I will likely exit my remaining bullish gold trades for clients at a loss. $1390 needs to be retaken on a closing basis for me to suggest we are out of the woods. Silver traded to its lowest level since 5/20…why that date is significant is a low trade of $20.25 (2 ½ yr low) and $3 trading range. We could see more pressure so I think buyers can get long from lower levels.

Softs: The fact that cocoa could not move lower on a 1% loss in the greenback leads me to believe there may not be much more downside...tighten up stops on bearish trade. Sugar has gained albeit very little 3 out of the last 4 sessions. I think traders can Dwyane Wade into bullish trade. A close above the 50 day MA, only 16 tics above today’s settlement would provide further confirmation. October futures have not been above that pivot point since 3/15 when prices were 10% above current trade. I was calling for a 4 cent break in December cotton and the last 2 sessions the market delivered almost 3 cents so tread lightly if not in the trade yet. A trade under 85 is my ultimate objective. OJ has lost 8% in the last 3 weeks but I think frozen concentrate will get cheaper yet…trail stops as about ½ the move has taken place in my eyes. A base appears to be forming in September coffee but we need to see the bulls get back in the driver’s seat. After an 18% decline in the last 60 days being a bull I have little company…just the way I like it.

Treasuries: Yields up equals prices down as those traders looking for a bounce in the Treasury complex were taken to the woodshed, me included. I puked out of my clients September NOB spreads at a $1500 loss per. Yes I do think at some point we get a bounce but with the chart damage today lower trade looks likely first in both 30-yr bonds and 10-yr notes. As for the short end of the curve I have screamed from the top of building that this could be the best trade of my career. Today’s decline in 16’ Eurodollar futures is one of the largest I have seen in recent memory, and for a change clients were on the right side. Continue to fade rallies and keep your toes in the water for the next few years is my advice. A trade back near the 20 day MA will be sold for my clients in 16’ contracts.

Livestock: Live cattle gained 0.82% closing above its 9 and 20 day MA…which is kind of a big deal. Maybe I should not be exiting bullish trade though I have advised clients in bullish trade to use any upside to close their trades…next resistance in August is seen at 121.40. Lean hogs gained 0.67% closing at their highest level in 2013. I am very close to crying uncle here for clients. On upside I would be forced to roll up my hedges or take a loss…stay tuned. A 10% move inside of 30 days is not justified in my eyes but my opinion does not matter.

Grains: Corn gained 3.63% today lifting futures to the upper end of the trading range...this was forecast in recent posts. Not to toot my horn but those reading and not trading with me yet let me put this in perspective. December futures have appreciated 45 cents H/L in the last 3 days...that is $2250 per futures contract. I am not always this right, far from it but maybe a little acknowledgment. Email me if you wish you were in corn so I know someone is reading this piece (mbradbard@rcmam.com). Book partial profits if in the trade. August soybeans were higher by 0.80%...while they lagged corn and wheat they were in the green and clients need them in the red. I may manage the trade i.e. leg out or cut losses if we see further appreciation in the Ag sector short term. We need a close under the 20 day MA, in August at $14.36. Wheat gained 2.68% to close at 2 week highs and at its 50% Fibonacci level. We are 25 cents above $7 and halfway to the upper end of the trading range mentioned in previous posts. Recent buys near $7/bushel are already looking smart…stay the course for now.

Currencies: Dead cat bounce in the US dollar underway with a 1% appreciation today. My objective in September futures is 82.25. The Euro, Pound and Cable are moving lower as forecast…use the 20 and 50 day MAs as your objectives on bearish trade. The Loonie gave up 0.80% already reaching my objective but if energies get hit as I anticipate we should see more pressure…trade accordingly. Allow outside markets to guide you. The Aussie did not cooperate today at least for me as I am in bullish trades with some of my clients. Futures were off 1.58% after being up in early dealings. If we not see buyers enter immediately this gets ugly quick so I may be forced to cut losses…stay tuned. This will be a much larger loss than it should have been. The hedge will lighten the blow but there is no reason to get hit for 3-4 cents at $1000 per penny. The Yen was in the red for the third day running, while I am not brave enough to trade futures in this cross with clients I like the idea of buying put options but keeping the size small. September could trade under par relatively easy in my opinion.

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.