Decision Time For Commodities

A number of markets not limited to the indices and Crude but as examples have reached critical technical levels as a decision on the next legs should take place very soon. Avid followers know I am calling for a further reduction in both aforementioned markets. The 100 day MA continues to act as a magnet as for pricing in the front month Crude contract. On any spikes as long as prices stay below $104 I remain bearish with my target still at $97.50.  My take is when prices breach $100 we should experience a fairly violent trade lower…just saying.

It appears heating oil is on the verge of breaking the 100 day MA as well while RBOB is still 25 cents above that pivot point. More downside to come in this complex is my take. Natural gas is below $2 a prediction I hinted at several weeks ago. I have yet to issue a buy rec and I’m not in a rush until I see signs of a bottom. As long as the 50 day MA caps any rallies in the Dow and S&P I would remain in the bear camp. I think we could still see another 75 points south in the S&P and 400 in the Dow.

Muted action in the metals today with gold and silver registering slight losses with both metals unable to make it to higher ground.  I remain bearish both gold and silver thinking the 100 day MA if challenged should cap any short-term upside. In June gold I would have buys on my radar closer to $1550 and closer to $29 in May silver.

Copper has dropped four out of the last five sessions losing nearly 7%. Do not rule out a challenge of $3.50 on the May contract. Coffee advanced 1.4% today but as I’ve voiced of late I need to see a trade closer to $2 to be interested in re-establishing bearish trades for clients. Ten year notes and 30-year bonds traded lower today but I think we approach the contract highs near term and would be looking to get short from higher levels in the coming weeks.

If we see consecutive closes above the 20 day MA in cattle, long entries would be back on my radar. Until that happens I would be on the sidelines looking for a lower long entry. It seems that in June live cattle we should fill the gap from mid May very soon potentially challenging the March lows. I am operating under the influence we’ve reached an interim top in agriculture. So on an outright directional trade I would be scaling into shorts.

As a pairs trade reading a newsletter today the author mentioned of a long corn against a short in soybeans. I charted out the spread long December corn and short November soybeans. Risk to reward I like the dynamic and think the premium to soybeans should be closer to $6.50 not the current $8. Tighten up stops as to not give back profits on any remaining longs in the Yen as our target was achieved yesterday.

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