Today in Commodities: June 30, 2009

As of this posting time, August crude oil’s daily range is $4.48 range, $4,480 per contract. No thank you, not for me! If the US dollar does manage to rally from here expect to see oil setback to $62/64. The 50 day moving average comes in at $63.66. Natural gas is lower by 2.5% trading to its lowest level since 6/4. We’re still advising clients to buy October $5/6 call spreads. Today’s price is approximately $1900 per.

Wait for the dust to clear before establishing fresh currency exposure. The dollar may rally only because no one thinks it will. In other words, too many feel the dollar is going to collapse, and usually when a trade is so one sided, everyone is wrong.

A bearish USDA report had grains down on the day. Things worked out well being we were moving to our new office yesterday so we didn’t buy clients into agriculture. Had we been in the office today, it could have been far more painful. Trade update: long September corn futures from $413 1/2 we advised clients to cover the (2) $440 September calls we sold against the futures for 3 1/2 cents today. We will continue to hold the futures but have now purchased September $3.40 puts as further downside protection. We expect corn to turn higher in the next 24-72 hours.

Wheat and soybeans are most likely buys, but we have yet to come up with a trade idea being as we see better opportunities elsewhere.

Gold and silver broke down today, perhaps on Q2 position squaring. We are incapable of predicting where prices will be the next few days or weeks, but are confident in placing clients long gold and silver if their time frame is longer than 2 months. We expect gold to test $1000 and silver to trade above $16 in that time frame. If you agree, use this setback as a buying opportunity.

If you took our cattle spread trade recommendation in recent weeks, we advised clients to book profits today at -480; a profit of roughly $300 per spread. We maintain that hogs and cattle should move higher from here as the recent lows should serve an interim bottom. Trade from yesterday: We were buyers of December 130/145 call spreads for clients in coffee at 350 points or $1312.50. Add some vitamin C to your portfolio, and get long oj. We like the November $1 calls and advised clients to add to their position today.

Comments

[Larry House:]

Thanks, Matthew. Your reviews are always helpful, and I really appreciate your candor in saying you don't know what is going to happen. That is refreshing. I do think I will add some more silver at these levels.

Jun 30 03:57 PM

[badboyish:]

Appreciate your views but I dont understand why you're so bullish on Natural Gas. Arn't American reserves at an all time high? Historically there has been a golden ratio between natural gas and oil but dont you think this ratio is bound to be altered if natural gas reserves are up 30% and actual oil reserves might be lower than previously estimated. Looking forward yo your views.

Jun 30 09:57 PM

[AndrewBaker:]

I agree that there is so little certainty at this time, and I also feel that the little certainty there is, is that gold (and silver) will trend upwards over the next substantial time period. It is uncertainty elsewhere in the markets that adds to the certainty that gold and silver prices will rise.

Jul 01 10:07 AM