Metals: Metals do not like higher rate talk. I truly do not expect a rate hike before year end but the Fed likes to throw it out there every now and then just after they release a false jobs report to keep indices moving up knowing they will just adjust the jobs number considerably lower next month. Meanwhile it keeps stock indices moving higher despite doing nothing to help the economy. Once they leave rates alone or bad economic numbers are allowed to come out, they will downplay hike talk and metals will rise again. Not yet.
Gold; October gold made it to $1370 from lows at $1310 and appeared ready to run to $1400-$1425. The much better than expected 255,000 jobs added against expectations of 155,000 put an end to that rise as it was then assumed and uttered by Fed skills that we can again talk about a rate hike in September. Don’t bet the farm on that folks. In fact, don’t even bet a buck. There will be NO economic shocks before November so the narrative can continue as to how great the economy is doing despite continued anemic GDP numbers showing the worst growth in the history of the country. Wait for a test of $1310-$1315 from the current $1340 if considering a by on October gold, risking below $1290.
Silver: September silver fell from highs at $20.80 down to lows at $19.51 so far for the same reasons as gold fell. The area at $19.25 has been very resilient and if it holds again from the current $19.78, a buy may be in order. The first downturn in US stocks may be the catalyst for the Fed to say no hikes are imminent and that may be the queue to buy silver.
Copper: Despite new all time highs for US stock indices September copper could not muster up enough strength to push through 225 and so far has slipped to 21550. There is minor support near 212 but if breached 20750-20800 would be the next target. The range going back to March is 202 down below and 230 up above so no large moves are in order. If we see 208 and that level holds, a buy may offer some upside potential.
Currencies and Financials: I have spoken for months in these pages that the US Fed, Japanese central bankers and European central bankers have been following a plan where each takes turns pushing the higher rates, no higher rates agenda as reflected by their monthly economic reports. The purpose is to keep the status quo where no markets suffer severe price breaks. This has had the desired effect to keep currencies in dependable trading ranges and price action for the past few months confirms that analysis.
British Pound: The Brexit vote in late June sparked a drop from 150 down to lows at 128 in about a week. Futures settled down, rose back to 13500 and since then have waffled between 130 and 135. The bias had started to turn slightly bullish until Britain lowered interest rates last week. This generated an immediate flush from 134 down to 130 where so far futures have steadied. If 130 is taken out we might see 128 but I believe it stays in a range from 130 to 135 so another dip to m130 from the current 13050 may be a buying chance, risking below 12750.
Swiss Franc: For the same reasons discussed in the above commentary I look for the Swiss to stay in a range as well. Last week brought lows at 10050 and highs just below 10400 and we have come back to 10185 presently. Do not look for a buy before 10100 or a sell before 10375 so watch the action for those prices if contemplating a buy or sell.
Japanese Yen: I cannot recommend a buy or sell here as this market has been manipulated more than usual of late. Over 20 years of QE and virtually 0 interest rates has turned the Japanese economy and the Yen into drones. If true prices were seen the Yen would be between 7500 and 8000. That is too low for the US and Europe however as all are trying to achieve total parity between the US, Japan and European currencies. For now a wide range from 9400 to 10000 has been achieved but you can’t trade that range as the sell offs and rallies are 2-3 day 400-500 point affairs based on what the Japanese central bankers say on any particular day.
Euro Currency: OK I’m starting to bore myself with this range talk so let’s be brief. It appears we can sell the September Euro near 11250, risking over 11350 or buy the Euro at 10950, risking below 10875.
Canadian Dollar: The Canadian Dollar is in the same boat as the others here. I had been speaking for months of the 7600 – 7800 range and that would have served well as the September Canadian has seen highs at 7800 and lows at 7550 since early June. I believe you can buy near 7550 from the current 7598, risking below 7480 or short near 7790, risking above 7850.
US Dollar: The September Dollar has followed the others so the only info needed to trade is the range. On top 9700 with an outer chance of 9750 should resist while 9550 down to 9525 should hold tough down below. I mentioned I’d rather sell a rise in the Euro and with the Dollar I would prefer a buy into a dip as our rates are “less low “ than in Europe.
The words from last time would have paid off as the September buck made it to just under 9500 last week before spiking to 9650 once the Fed hinted at higher rates after the bogus jobs number which will be adjusted sharply lower next month. We should continue on up to 9750 from the present price of 9638 and perhaps 9800 where you may consider a short, risking above 9900.
Eurodollar: December futures have fallen from highs at 9937 the day of Brexit to lows at 9916. If US stock indices keep rising we may test 9910 and maybe as low as 9900 if there is a hint of a rate hike. Hints and realities are two different things so I would use a dip to those levels to consider a long future as there is little to no chance rates will be increased during 2016.
There is no need to change a word from last time. December futures made it to 9918 and were easily headed over 9925 but Fed words last week hinting at a September rate hike stopped the budding rise in its tracks as we pushed to 9906 today. I believe that the Fed would actually have to raise rates to see much lower than 9900 but as I mentioned earlier, this extremely partisan Fed will do nothing to risk lower stocks coming into November this year.
30 Year Bonds: Obviously most of the talk within this complex is interest rate related. Thus bonds have been trading in a highly volatile range depending on which Fed shill said what on which day. This has been the reason for the range from 170-175 going back to mid June. I would rather buy on a dip to 170 than sell a rise to 175 for the reasons discussed today and that is that I believe there is NO WAY the fed raises rates this year or at least until December. Futures bonds rise on lower rate talk and fall on thoughts of higher rates, thus my reasoning for buying into dips.
S&P 500: After holding near 2140 during the past two weeks but failing to rise much more than the 2155 area the September S&P needed a kick start to advance to new highs. Thanks you US Fed as expectations for a 155,000 addition to the jobs number Friday fell about 100,000 short as the government said we added 255,000 jobs. Recall the 275,000 jobs that were added in May only to see that reduced to 38,000 in the June numbers and you can see why any numbers are so fishy from this administration and Federal Reserve Board. But …….. stock indices reached new highs and that is the mission…. Hiding the true economy from the American people as most believe a higher stock market means a stronger economy. We will probably run to at least 2200 up to 2225 now before next’s month’s numbers so the inevitable reduction in this month’s jobs number will be forgotten by then.
Dow: Commentary is the same for the Dow so this month’s deception should be enough to push futures to 18550-18600.
Energies: During the past week it appears we had become oversold after the harsh downturn for energies which began in early April. The question now is how far the current upper correction will take us or if we pull back after the rebound here and attempt to show a bottoming formation for all here.
Heating Oil: Between early June and last week September heating oil fell from 160 to 125. So far we have rebounded to 135. There is strong resistance at 140 so that level must be beaten for much more on top. There is little to trade for energies now as we are either in a transition between a market trying to show a temporary bottom if we pull back from here or we will go a bit higher to complete the correction before heading lower once again.
Unleaded (RBOB) Gas: For the reasons mentioned above action may slow here. September gas dropped from 164 to 128 during the past two month’s sell off and so far has rebounded to 140. If 140 is beaten we may see a quick shot to 145-146. If 140 cannot be topped look for a pull back towards 130-132 and some attempts at a bottoming formation. Supplies remain ample but after sharp breaks new sellers start to get harder to come by.
Crude Oil: September crude bottomed below $33 in late January and rebounded to $52.73 by June 10. Last week saw the subsequent drop finally halt at $39.19 and so far we have recovered to $43.16. If $43.25 is exceeded we may see a quick spike to 44.50-45.00. If futures cannot dent the 43.25 areas a pull back to 40.50-41.00 is likely. Let’s watch for either scenario this week. Supplies remain at lifetime highs so shy of a OPEC freeze on production and with very weak world demand rally attempts may fall short of the $50 level.
Natural Gas: Except for a few blips above and below September futures have held between 265 and 290 for the past few months. Considering the much higher temperature than normal scenario in the US this summer that is a paltry rise from the 175 lows seen in March. All time record supplies are the culprit for these low prices and with supplies above and below ground and the sea estimated at 400 years worth, it may be a long time before we see much more than 350-400 on top. For now a rise to 300 may prove to be a nice shorting opportunity, risking above 320. Down below I wouldn’t even consider a short term buy before 260 from the current 275 for September futures.
Grains: After a very hot and dry June the much rainier July pattern finally improved stressed crops enough to see much higher yield potential. We seem to have stabilized after the rough July sell offs and now await the final crop numbers expected during the next month.
Corn: By mid June as mentioned above, hot and dry conditions had enabled December corn to make it to $4.50. Once the rains began in later June it took just two weeks for futures to crash to 3.45. The next month saw further weakness to 3.29 just last week. The recovery so far has stopped at 3.38. For now most of the selling should subside as there is talk of some dry areas as well as some diseased areas so while there is no immediate ideas of much more than 3.50 on top, lows may be capped from 3.28-3.30.
Soybeans: The bean story is the same as with corn, only the numbers change. November beans peaked at 11.90 in mid June and worked their way back to 9.41 by last week. So far the recovery has brought beans back to 9.90 and this Friday’s USDA report should tell us more as to carryover. Exports have been pretty solid so the meager rebound is somewhat a puzzle. As with corn we may have dropped enough for now so from the current 9.80 I would consider a long future or call option on another dip to 9.40-9.50.
Soy Meal: Meal and beans exhibited similar action as the September meal dropped to 325 last week from highs at 420 in mid June. I believe 325 will hold as long as Friday’s USDA numbers hold no further bearish surprises. A buy near 330 from the current 335, risking below 324 may be the way to go provided 330 shows support. On top a move to 350 is expected initially and perhaps more if numbers come in lower than expected.
Bean Oil: September bean oil fell from 3570 in June to lows at 2950 early last week. We have quickly bounced back to 3100 and may see a bit more to 3150 up to 3225 if the 3050 level can hold. Of course bullish numbers Friday may enable futures to drive through 3225, enabling further upside to 3400.
Wheat: As with all grains September wheat was also bludgeoned from highs at 5.35 in mid June to lows just below 4.00 last week. So far we have popped back to 4.23 and additional corrective action to 4.40 is possible this week. From the current 4.16 use a slide back to 4.10 to consider the long side, risking below 3.97.
Softs: To get some cheap and exciting thrills I thought of sky diving or bunji jumping. Nah, I decided to trade the softs instead for some REAL thrills.
Sugar; In late June October sugar ran from 1850 to 2125 in just three days. It did actually take about 4 weeks to reach 1870 where it held for 5 days straight. Of course the three days since holding saw a push back from 1880 to 2100. Crops are reduced for sugar this year and the funds were obviously supporting their long positions at 1875, not allowing lower trade by coming in with heavy buys whenever it sniffed 1875. Let’s see if 2125 is tested again from the current 2055 and if so a sell may be in order.
Cocoa: September cocoa did its best Rocky Mountains impression last week. It took 2 days to rise from 2819 to 2952, one day to fall to 2880, one day to push back to 3000, one day to drop to 2948, and one day to rise back to 3057. (see earlier sky diving comment). Supplies are OK here so let’s see if futures can surpass 3100 from the current 3036. If so wait for a push to 3160 for a possible sell. If we pull back to 2950-2960, a buy may be the way to go.
Cotton: The oppressive heat in the Southwest US has stressed cotton. December futures finally rammed through 7500 after numerous attempts and rapidly sped to 7800. The correction so far to 7600 relieved short term overbought conditions. Look for a test of 7500 this week and if that holds, we may be looking at a buy. Fundamentals still show just average demand but this will be a supply related move due to tighter heat stressed crops.
Orange Juice: September OJ has mimicked cocoa of late. Some tree disease problems in Florida and Brazil have been responsible for the run from 126 in May to highs at 19600 two weeks ago. After the double top at 196, futures needed just 5 days to plunk to 170 and just three more to fly back to 190 this morning before flailing back to 178 by day’s end. Place your bets ladies and gentlemen place your bets.
Coffee September coffee bottomed near 123 during May and by mid July had advanced to 155. A two week break brought futures back to 137 and we currently reside at 141. I will wait here as supply and demand are evened up so it wouldn’t be a surprise to see another shot to 150 or another dump to 130.
Livestock: Both live and feeders have finally shown bottoming action after the recent positive cattle on feed report while hogs have continued to be slaughtered but may just be showing a glimmer of bullish life based on recent trading patterns.
Live Cattle: October live cattle finally bottomed at 10550 just two weeks ago. The lower breakout point before that was 116-00 and futures have spent the past three sessions trying to overcome that near term resistance. While I feel we have put in a bottom I would be patient and I believe we may see a slight correction to 11200 where I would definitely explore a bullish strategy.
Feeder Cattle: The story is the same here as August feeders traded below 13400 two weeks ago and made it to just shy of 15000 today. I believe we may have a bit more up to 152 before a break but we are overbought now so I would be the patient for a pull back to 142-143 before taking a flyer on the long side.
Lean Hogs: October hogs have fallen from highs at 7500 in late June to lows at 5750 last Thursday Futures made it back above 6000 today and are ripe for a short covering bottom picking rally. I like the long side at 5850, risking below 5735. On top I look for at least 6200 and if that doesn’t resist, further up to 6450 is a real possibility.
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