Crude oil broke out to the upside today, confirming that the next leg is likely higher, closing back above the 50 day MA; in November at $77.35. From here next stop should be $79.15 and a settlement above that level should bring $82/83 in the month of October. Heating oil was able to close above previous resistance gaining nearly 3.50% today, and RBOB looks bullish as well, trading up by 2.35% today. A settlement over the $2/gallon level in November is required for confirmation in RBOB. Natural gas is biding time trading sideways today dancing around the $4/level. We’re suggesting scaling into November and December futures and purchasing at the money December call spreads. We’ve revised our upside target in the November contract from $4.76 to $4.53.
We remain convinced that the indices are overstretched to the upside, thinking the 10% rally in the last month will be cut in half. The next leg lower should drag the S&P to 1087 and 10000 in the Dow.
In the last 2 weeks cocoa has gone from oversold to overbought lifting prices back above the 50 day MA having gained 10%. We will be looking to get clients short December 10′ or March 11′ contracts in the next few days…stay tuned. Sugar looks toppy but it has for the last 10-15% so wait for confirmation of a top. Cotton was down limit today giving up 3.8%. Another market that we feel is over priced and we’ve again put shorts on our radar. Some clients got short coffee yesterday and we’re temporarily rewarded today with coffee down 1.69%. This is an unrealized profit so we’re not celebrating just yet. My downside target is $1.72 and then $1.65. On that clients should be able to pick up 35-50% on their options… stay tuned. Clients were advised to take a small loss on their feeder cattle today; just over $100 including fees/per position. As long as live cattle hold the trend line in December at 98.50 we will remain bullish. (more)
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