Commodities Wrap-Up: Don't Get Too Long

Natural gas runs higher on the close to trade above the 50 day moving average; $4.06 in August. Buy the October $5/6 call spreads and sit for the next 60 days. We’ve been preaching this trade all week …did anyone get involved? No exposure currently in crude with clients because we cannot figure out a short-term direction - a break below $67 or above $72 should determine the next leg.

If the dollar closes below 80.00 in September, all international currencies should move higher. We will be exploring that in more detail in our weekly commentary next week. We advised clients to take their July 93.00 Swiss franc calls off at 44 points today, a bit short of our objective of 60 but we did not want to deal with time decay over the weekend.

For the last 5 sessions December corn has been unable to break $4 - we will be looking to scalp off these levels until we get a close below $4. Remember we want to have long exposure in agriculture (corn and wheat) into the USDA report next Tuesday. Not sure for soybeans yet.

Gold and silver traded higher but I was not impressed considering the dollar weakness. Stay with options we have recommended for now.

New contract low in lean hogs today ahead of the report. We are positioned short futures with clients against a purchase of (2) August 62 calls. See previous posts. We rolled out of more sugar longs for clients thinking we should get a retracement to get positioned long again; March 10′ contracts most likely.

Comments

[Ivan Kitov:]

seekingalpha.com/artic...

Jun 26 04:01 PM

[CLH:]

This commodities rally appears to have run out. It is a dead cat bounce from last years bubble. Commodities esp. oil are headed down from here.

Jun 27 09:31 AM

[Sovestor:]

Commodities are tricky. We think there will be unexpected volatility on key commodities in the next few weeks.

Jun 27 10:33 AM

[sethmcs:]

I expect oil to fall after the 4th of July. Usually political events provide support for the maket but cap and trade buzz will kill the speculative desire for oil. Actual demand is falling due to change of habits and recession. Weak dollar? Evidence of inflation is not here yet and the dollar will not fall significantly in the short-term. International trade with is falling in dollar terms. Not a bullish for oil.

Jun 27 11:17 AM

[MarkitWacha:]

This market is frustrating. The long term fundamentals point to higher commodity prices, just to support the increasing number of humans on the planet. However, it appears that the treasury is artificially deflating the planet's supply of dollars in the short term by offering bond contracts in exchange. This is monetary deflation, pure and simple, because M2 (velocity) is already lower due to the recession. If commodities don't rise to their levels from 5 years ago, then projects around the world will cancel, leading to more misery later.

Reports suggest that less than 10% of the money allocated for the stimulus have been spent. However, 20%+ has been pulled in from the bond offerings. Our government is LOWERING M2 by sitting on their hands with all this cash.

I expect commodity prices, especially ag, to rebound by the end of October to new 26-week highs.

long: DBC

Jun 27 11:41 AM

[yank:]

wacha:
Good points. The Fed is playing a very dangerous game here. They publicly whine and moan about how bad "deflation" is and behind the scenes they are draining reserves from M2. Funny I thought this was the key lesson that Bernake learned from studying the Great Depression. Mainly the disastrous mistake made by Hoover's people to withdraw liquidity from the system. It was the "death knell" for the decade of the 1930s. Let's hope Bernanke does not repeat that mistake. Concerns about future inflation although legitimate are still far away on the horizon. The primary challenge right now is to stop deflation. I'm not sure the Fed understands that.

Yank

Jun 27 03:09 PM

[Paul H. M.:]

Sounds like a bitter McCain supporter.

He lost, move on. The nation is better off without the GOP creating war and recessions with every move.


On Jun 27 05:17 PM usethed wrote:

>
> The hoopla with this candidate is over, now his use by these
> institutions of power is being seen, as the United States is
> undergoing a complete takeover right before your very eyes. This
> is
> the end of the United States as we know it. With the Fed in full
>
> control, you may as well be in ancient Egypt with a Pharaoh, and
> be as slaves.
> good articles:
> heavysidetrade.blogspo.../

Jun 27 09:57 PM

[Jann Lee:]

MONDAY, JUNE 29, 2009


Money Supply
Money Supply (Bil. $ sa) Latest Prev. Yr. Ago

----------------------...

Week ended June 15
M1 (seas. adjusted) 1656.9 1631.1 1378.4
M1 (not adjusted) 1624.6 1594.9 1360.0
M2 (seas. adjusted) 8369.3 r8353.6 7690.2
M2 (not adjusted) 8401.5 r8384.6 7715.0

----------------------...

Monthly Money Supply
Month ended May
M1 (seas. adjusted) r1596.0 1592.3 1363.5
M2 (seas. adjusted) r8327.9 8264.0 7684.5

Jun 28 09:55 AM

[Northstar10000:]

paul
you must have drunk the kool aide. What's coming as a result of Obmeronics will make us wish for W. Never thought that possible until I saw what this boozo is creating. Confidently Clueless is describes the Obmerettes.

Jun 28 01:20 PM

[AuGod!:]

I admit to being confused. One question I have is whether or not there will be a hike in dairy prices and if so when? I heard that the CME “dairy markets” are talking 2010 wholesale price increases of 50%. We all know that this “futures” scenario won’t necessarily lead to an equal price hike for consumers but the volatility in this case can mean over-correction on either end - that is both highs and lows. Dairy farmers aren’t making much of a living these days, a fact leading to the culling of herds. Over the past year the Wholesale milk futures dropped about 50% according to Alan Levitt (analyst/writer of reports for the Merc) who adds that the CPI (if we can believe that index) tracked an 18% fall in retail. So if futures as forecast CME, hold true, what are we looking at on the shelves in 2010? I have a sense that this specific market could be a bellweather going forward on all associated products and beyond that as well.

Jun 28 02:56 PM

[HA65MPH:]

PAUL , MARCHING TO THE TUNE OF OBAMMANOMICS , WITH YOUR EYES WIDE SHUT !....PITYFUL

Jun 28 04:27 PM

[HA65MPH:]

USETHE, ...SO SAD TO SEE OUR NATION BEING CHOPPED OFF AT HER KNEES BY THIS OBAMMANAION , THE POOR WILL FOLLOW HIM TO HELL TO KISS HIS FEET , THEY KNOW NO BETTER , ...I THINK THE VERY UNEDUCATED FOLLOW HIM TOOTH AND NAIL ...A HITLER IN OUR TIME , ...OBAMMA HUSSEIN IS THE WORST TERRORIST IN OUR COUNTRY ..

Jun 28 04:32 PM