Commodity Wrap: Crude Down Five Days in a Row

With  a more positive outlook domestically and abroad, expect commodities that had previously factored in a more dire picture to get back losses from late 2011. Yesterday makes it five days in row with Crude down just over 1% which, as of this post is trading at six week lows. A close below $98.30 in March should signal lower ground. $99 should cap further upside and I could see prices drifting back under $94 in the coming weeks. Both RBOB and heating oil are having trouble keeping their heads above water as well. If Crude turns south as I expect, do not rule out a 15 cent correction on the distillates.

To clarify, if there is confusion when natural gas broke the 9 day MA we advised moving back to the sidelines to exit long exposure. Depending on your order, entry would dictate if this was a slight profit or a slight loss. There is no doubt longs over the last few months on the whole have been a losing proposition…the good news is our clients and hopefully followers trade more than one market and can use my advice to offset their natural gas losses in other commodities.

Stocks are having trouble breaking the 20 day AM on the downside as that level has supported for the last three sessions. In fact, after the 1% plus surge yesterday, domestically, prices are back above the 9 day MA. My suggestion is wait for the NFP number later this week to get re-positioned long or short. My gut tells me that if by week’s end we do not see a new high, expect a 4-6% correction in the coming weeks.

Gold finally reached our target, trading above $1750/ounce  for the first time since early December. Past performance is not indicative of future results but the last time gold was around these levels we experienced a rather nasty $200 sell off so although bulls remain in the driver’s seat, have an exit strategy in place. I ultimately see $1850-1900/ounce in the coming months but I expect a correction first…trade accordingly.

Silver continues to butt its head against the $35 level but we need to see that level penetrated very soon or a correction will likely commence. A trade above $34 would lift prices to the next resistance at $35.50 while a correction south would take silver back near $30.50-31. I still think the 79.00 level holds in the dollar index and we experience a dead cat bounce from here.

The euro could be sold with tight stops but I would hold off trying to pick tops in other crosses as they continue to inch higher. Traders of late should have been stopped at a  small loss trying to scale into shorts based on my trade recommendations.

Cocoa and sugar broke their 50 day MAs yesterday and it appears cotton will by week’s end. I continue to  advise fading rallies in these three soft commodities.

OJ lost 5% yesterday and should be headed back under $2/lb in the coming sessions. I am expecting a violent 10% correction…trade accordingly.

Treasuries had their first negative day in six sessions. Likely fast money taking some risk-off ahead of Friday’s NFP.

Corn and soybeans have been treading water for the last month, getting back their December losses in January but the standout of late has been wheat, gaining 1.25% yesterday and advancing to eleven week highs. I see the next resistance on the March contract between $7.15-7.25.

The 20 day MA in lean hogs is acting as a magnet for prices. I suggest buying a dip and therefore have no client positions currently. April live cattle were higher by 1.75% yesterday, trading to seven week highs. I remain bullish and believe this leg can carry prices to contract highs in the coming weeks…trade accordingly.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.