Commodity Wrap: Expecting Higher Trade in Treasuries, Commodities

Over the next few sessions we will know, but we may see some gains given back in equities as minor chart damage is being done. That being said, expect higher trade in Treasuries and commodities on a stock retraction.

Crude continues to flirt with $100 but is unable to pick a direction. The longer this consolidation pattern continues the larger the breakout. The tough part is determining in what direction prices will break out. A settlement above $100.50 or below $98 would likely signal the direction, but until then who knows?

Natural gas failed to hold onto early gains trading down 3.4% as of this post. As long as the 9 day MA holds on a  closing basis at $2.59 in March, I’m assuming the bottom is in.

Equities have not given up much ground but prices have lost ground now for the last three sessions and yesterday could be the first settlement  below the 9 day MA. If that happen,s expect the 20 day to support and then the 50 day MA. Those levels are 1293 followed by 1250 in the S&P and 12470 followed by 12090 in the Dow. Trade accordingly.

Gold failed to trade higher yesterday but I am still eyeing the 61.8% Fibonacci level at $1750 in February. Considering the run we’ve seen of lately, I would not be adding new positions at this level but rather be looking for an exit door. Those still long are encouraged to trail stops.

March silver is having trouble holding above $33.75 as that level has been rejected the last three sessions. Momentum remains with the bulls but without a settlement above $34 very soon I would expect a  $2.50-4.00 correction.

The dollar dug in its heels yesterday, gaining for the first time in four sessions. If the 79.00 level can hold in March for the next few trading days we may get a dead cat bounce. I would expect all buying to be rejected between 80.25-80.50 if we can even muster that much. Aggressive traders can sell the commodity currencies with stops above the recent highs. This is a good risk-to-reward trade.

Cocoa got within $10 of the 100 day MA but failed to reach our target. From here it looks like  lower trade which would be confirmed on a  trade below the 50 day MA; in March at 2255.

Cotton looks destined for lower ground as well. This too would be confirmed on a trade below the 50 day MA; in March at 92.75.

Treasuries gained for the fourth consecutive session and do not appear to be done on this leg. We’ve already seen new contract highs in 10yr notes and we could be headed for fresh highs in 30-yr bonds. Trade accordingly.

Ags traded lower yesterday with soybeans the biggest loser at a 2.77% loss. Those that are long corn or wheat could tighten up stops as we may experience a bit of a giveback. A trade under the 20 day MAs in both lean hogs and live cattle should have traders back on the sidelines.

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