Crude recovered the two previous days' losses, gaining 1.8% today. We expected to see the 50 day MA give way and prices to trade lower, we were wrong. We would move to the sidelines until Crude gives a clearer signal on direction. We expect a trade above $79.50 to signal higher ground, and a trade below the 50 day MA at $76.35 to signal lower ground. Natural gas is higher by 2.44% as of this post, having gained all four sessions this week. For futures traders, as long as the 50 day MA holds, on a closing basis we would remain long. For option traders, we like purchasing 50 cent October and November call spreads.

We would think after a 50% Fibonacci retracement and a failure to remain above the 200 day MA indices are headed south again. Whether it be talk of deflation, a disappointing jobs number or lackluster earnings, a move below the 50 day into next week, at 1077 in the S&P confirms lower action. Aggressive traders could short indices with stops above the recent highs.

Regardless of the color of the book, traders did not like what they saw today. Crude traded below the 50 day MA but did manage a close above that level; in September at $76.30. We would be selling rallies if forced into the market, still thinking there is more down side. By the conclusion of the week we would expect an attempt at $74 in the lead month. Natural gas appeared to break out to the upside today but before we get too excited, understand yesterday was options expiration and today is the LTD for front month futures. Tomorrow’s action will be key to see follow thru and the AGA inventory report also comes out. We suggest purchasing October and November 50 cent call spreads.

The stock market did not like the Beige book and could be rolling over from here. Clients exited their August 1150 ES calls and bought back their September 1000 ES puts today at just better than 6 point ($300/per). This leaves them long September 1075 ES puts with a target of 1025 on the futures. If we roll over from here we will be looking to scale into shorts in various indices for clients with stops above the recent highs. We’re perplexed in the Treasury complex and have our hands full with the indices and currencies so we will stand aside until we get a clearer picture.

In case you haven't noticed, agricultural products, grains in particular, have been putting on an impressive rally. Take a look at this chart of the Dow Jones - UBS Grains Index:

If you're looking for a way to participate in this rally, I have the following list of ETFs courtesy of ETFdb.com: