Energy:I do not like the action in Crude so I advised clients to cut their shorts in half. Do not misinterpret me; I am not getting long but rather lightening up on short trades. Though I do not agree with the acceleration of commodities that we are seeing, I refuse to fight it. Hedgers should also start to wade into longs in heating oil and RBOB to protect from upside spikes. My suggestion is a long future against a sale of out of the money calls 1:1. High to low natural gas moved 30 cents. Tighten up stops just below the 18 day MA which should ensure at least a small profit unless we gap down tomorrow. My take is if we break that level we may get a chance to get one more buy below the $2 level…stay tuned.
Stock Indices: The advance the last three days has lifted stocks to three week highs. The next test will be if buyers can push securities to their March highs in the coming sessions. I’ll be absent on the sidelines with clients not trusting these levels. Another 25 points in the S&P and 100 points in the Dow mission accomplished.
Metals: Copper advanced 2% clearly penetrating the 100 day MA with conviction, so the sentiment is back in the bull’s hands. What was resistance should now serve as support; in July at $3.72. Gold also joined the party gaining nearly 1%. As long as stocks hold at current levels, and if crude and copper heat up, expect prices in the metals complex to gain…including gold and silver. Aggressive traders can gamble with shorts up to the 100 day MA; in June at $1678 but it may be prudent to take it at this level, your call. Silver is back above $31 …exit shorts and look for a higher selling level.
Softs: Sugar lost 3.25% today to drag prices near 1 year lows. I guess I should not have advised booking profits on shorts in recent sessions. The reality is after a 15% move, there is no need to get greedy. I would say we are close to putting in a bottom and I will be shopping bullish plays very soon…stay tuned. All other soft commodities are at levels I don’t want to be long or short as a speculator so unless you’re hedging look elsewhere.
Treasuries: You will notice if you trade long enough there are certain indicators such as moving averages (MAs) work for different commodities. For this complex, it is the 20 day and 40 day MA that I have had the most luck. For frequent followers, you will recognize I use special time frames for different complexes. Being that prices bounced off the 20 day MA in 10-yr notes and 30-yr bonds, I would not be short.
Livestock: Confirmed cases of Mad Cow do not affect the cattle market for one day and then are swept under the rug. Live cattle and feeder cattle were lower today and in my eyes eyes will continue to see weakness short term. Some speak of the triple bottom at 111.50 in June but that should be busted in the coming sessions. If I’m wrong, next week I will buy with stops just below that level…stay tuned. Lean hogs may be basing out. The first sign that an interim low is in would be a settlement above the 9 day MA; in June at 87.95. After viewing longer term charts, weekly, and monthly I remain bearish even if we do get a dead cat bounce from here.
Grains: Talk about manic…Ag markets cannot make up their mind on direction. Just when I expected corn and wheat prices to fall apart and post new lows, buyers emerged. Corn and wheat picked up 1-2% depending on the contract months. I’m not a buyer or seller until the ship rights itself and I get a better feel. In a perfect world we get a healthy break in the grain complex so we can buy into late May/early June before the crop report. Old crop soybeans continue to inch higher but new crop has been flat for the last two weeks, so I see this move stalling for now. There has been so much talk of higher soybeans and I don’t like being a sheep. If and when the trend line in November breaks I think it could be ugly. The bulls are in the driver seat but I just was too late getting on this train. The fact that the WSJ is talking about soybean meal prices makes me even more leery of long exposure in soybeans.
Currencies: The grind lower in the dollar index continues with another small loss today. No clear winners in FX today, but expect more upside as long as the greenback is out of favor. BOJ tomorrow so it would not be shocking to see a 1.5-2% range in the Yen…be careful.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor’s needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.