Today In Commodities: Still BearishPosted on Thursday, December 15, 2011 - 02:43 am
A number of commodities have gotten drilled of late and in my humble opinion there is more to come. Crude is lower by $5 closing back under to 40 day MA …our first target mentioned in recent posts. From here we should see $93 and possibly a trade under $90/barrel…trade accordingly. Continue to use rallies as short entries. A new contract low in natural gas with prices getting hit for 4% today. Tomorrow’s AGA report is either going to put a bottom in natural gas or get prices back under $3…tomorrow’s action will be critical in my opinion. The near 15% slide in recent weeks has been painful for clients holding longs but fortunately most have been advised to have short exposure elsewhere to soften the blow. Day three of a stock decline with markets getting hit again..all indices are lower by more than 1% and look destined for lower ground. As we’ve said of late 1185 in the S&P and 11400 in the Dow would be our short term targets.
At its lows the break in gold approached $100 today and as of this post prices are down by $86/ounce. Further chart damage was done as it appears a trade under $1500 is doable by year’s end. Silver was even uglier giving up nearly 8% as of this post under $29/ounce as predicted. From here we should see lower ground in both metals so stand aside or have bearish exposure. Copper lost 5% as well and if this continues a trade under $3 could be in the cards. Appreciation continued in the greenback with all crosses lower today. Plenty of weakness in the commodity currencies which makes sense considering outside markets. I expect weakness to persist…trade accordingly. Cotton and coffee should continue lower as we see little support before $2 in coffee and 80 cents in cotton. 30-yr bonds and 10-yr notes will likely challenge their contract highs if weakness in commodities and stocks persist. Corn and soybeans held onto their recent lows but wheat posted a fresh low. Considering outside markets we would back off as a buyer and expect prices to drift lower. Stand aside. Start scaling back into long exposure in lean hogs. My suggestion is to bite off 25-33% off the total position you want at these levels and then add to the trade at a later date…stay tuned.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.