Energy: The 100 day MA capped upside once again in Crude oil futures with prices closing under $94/barrel in September. My stance is exit all longs as I anticipate lower trade in the weeks to come. My target on this contract is a trade back to the 50 day MA approximately $7.25 from current prices. Even with Crude making no headway the products were well bid today with RBOB higher by 1% and heating oil adding 1.20%. RBOB closed above $3 though I see limited upside and my suggestion is exit longs. Of late heating oil has been the strongest performer in this complex jumping 7% in the last 5 days. I've advised my clients to move to cash here as well. The clients I help hedging their distillate are in cash waiting for a pullback and then they will re-establish hedged ideally 15-20 cents/ gallon lower then their exit. Natural gas spiked on the report but did a u-turn unable to hold gains closing 6.5% off its intra-day highs. Today's daily range represents a $2,500 trading range so unadventurous traders look elsewhere.
Stock Indices: Stocks continue to climb their wall of worry as the S&P futures closed above 1400 for the first time since the first week of April. The rate of appreciation is slowing which leads me to believe limited upside moving forward. The Dow is closing in on its 2012 highs within 100 points based on the close. Do prices continue higher? While it is possible lighten up as book some profits.
Metals: The 100 day MA continues to act as the pivot point in gold. Forced into the market I would rather be long than short but until we get out of this sideways action I see better trading opportunities elsewhere. Trades down to $1580-1600 should be met with support. Silver has maintained $28/ounce the last three days but really has not been able to gather any momentum. It appears both metals are waiting for a clear direction. The lack of certainty in the economy as a whole has metals second guessing themselves. Expect sloppy two sided action moving forward.
Softs: Cocoa is approaching its 2012 highs and is being met with resistance just under 2500. Lighten up until prices retrace or get above that level in the September contract. Sugar continued lower closing below 21 cents. I have advised clients to exit bearish trade but that does not mean I am a buyer just yet. Solid support is not seen for another 5-6%. Cotton stopped just short of its 100 day MA. Expect 77.50-78.00 to act as resistance moving forward in December. November OJ remains weak until prices get above the 50 day MA; on that at $1.15 I would be willing to probe longs. Finally some direction as coffee broke support and appears to be headed lower. Today's close was the lowest close in 6 weeks. A 61.8% Fibonacci retracement puts December at $1.64 but I would not rule out a move closer to $1.50 in the coming weeks.
Treasuries: Sentiment in Treasuries remains bearish even though in 2 short weeks prices have gone from overbought to oversold. Continue to use upside as selling windows. My favored play remains the NOB spread; short 30-yr bonds and long 10-yr notes.
Livestock: October live cattle fought back to their recent highs. With mixed signals I would not suggest trying either side of this market currently. A 5 cent trading range for the last three weeks appears to be base building in feeder cattle but to take a stance on direction it may not make sense at the moment. I'm calling an interim low in lean hogs this week. Volumes have remained steady and prices look like we could at least bounce from here. Aggressive traders could probe bullish trade. My suggestion would be to gain long exposure via futures and sell out of the money calls 1:1.
Grains: A break out in corn today likely means higher ground. I will be absent with clients but clearly the fundamentals have been pointing higher for weeks and now the technicals support that. I still am in the camp a correction is due but I will not trade on my opinion. Soybeans gained over 3% to get back above the 9 and 20 day MAs. Higher ground to come here would be my take as well but I prefer the sidelines or other sectors. The bulls are back in the driver's seat in wheat as well trading near 2 weeks highs. As long as the aforementioned MAs hold prices should trade higher in Ag across the board.
Currencies: The dollar is finding mild buying interest but until prices retake the 20 day MA just above 83.00 in September I'm bearish. The Euro and Swissie can be sold with tight stops above the recent highs in my opinion. The Yen remains a sale as prices closed below its MA today. 1.2500 in September is my first target...trade accordingly.
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