Today in Commodities: Thursday, July 2

Energies traded lower by 3.5-4.5% today. We will shortly be exploring longs in crude oil for clients. For those brave souls who are currently short we would advise trailing stops down to protect your profits. August crude oil should find support at $64.50 the 38.2% Fibonacci retracement level followed by $61.90 the 50% Fibonacci level. Natural gas did break the trend line in recent sessions so at the moment we would refrain from picking a bottom in futures. That being said we are still advising clients to accumulate October $1 call spreads.

The only 2 currencies that traded higher today were the US dollar and yen, if the stock market continues lower the yen should remain bid. We will not be trading the US dollar for clients but we will be paying very close attention as the dollar will set the tone for movement elsewhere. On a close above the 20 day moving average in the dollar at 80.64 in September look for further upside and for other currencies and commodities to falter. The only play we endorse currently in commodities is long exposure in the Loonie. Grains were lower today, clients got stopped out of their long corn at a loss today. Stops were executed at $3.48 in September and $3.58 in December. We will be looking for a long entry again after the holiday.

Gold goes into the holiday weekend down $10 closing just below the 50 day moving average. As long as prices stay above $900 we like being positioned long. September silver traded to its lowest price since May 5th. We are down on all our recent long entries for clients but we’re positioned for the next couple months and will be adding to the position when a bottom is confirmed. We still anticipate seeing $16 plus in the coming months. Continue to scale into shorts and puts in the March 10′ Euro-dollar. Equities are down a little over 2% heading into the long weekend and being prices are below the 50 day moving averages if we close below these levels look for more selling next week. We will be looking to re-enter cattle in a spread next week. Long December live cattle/ short October live cattle @ -50. Coffee and oj remain our picks in the softs sector.

Comments

[herbert hoover:]

Be careful with those oil trades - I have a feeling that that bubble is about to burst

Jul 02 04:37 PM

[AssetReset:]

Oil bubble burst?
Correction maybe - certainly not burst

USD is still weak, developing nation's oil consumption is not slowing (it is increasing). Where is the bubble.

The low-hanging fruit has been picked; new resources are hard to get. Pumping crude is now more expensive than ever.

Oil @ $60 properly reflects fundamentals in my eyes:
Developing national demand
Scarcity becoming an issues the MOMENT demand ticks up

No bubble here
I buy on all pullpacks

Jul 02 06:09 PM

[icutradin:]

I believe you will find the economy actually getting stronger within the next couple of months. I will be buying this selloff, around 800 on the SP.

Jul 02 09:24 PM

[Maxe Paul:]

Although the stock market is in a bear market, commodities are now in a new bull market, buy on weakness is the rule of thumb now.

Jul 02 11:56 PM

[AndrewBaker:]

The stock market is headed down, and after the holiday, that's where it will go. Commodities will respond accordingly: gold and silver to go up as a store of wealth, oil - which has been used recently for wealth storage - will vacillate from $60 to $70 or even drop below $60 as demand is not there - whilst industrial metals will fall for the same reason, and agricultural softs will slowly rise because people will look to them as a defence against inflation as we all have to eat, and many crops will go up in price in time for supply and demand reasons as well.

Slowly I'm building up on gold as in the longer term I believe the trend is substantially up.

Jul 03 09:00 AM

[Joseph Porc...:]

Will Government spending increasing, and the increase in debt, must eventually cause a devaluation of the dollar. As the dollar weakens, we could see a period of rapid inflation. Precious metals, energy and emerging markets will all benefit from this period.

Jul 03 10:53 AM

[CaptainJJack:]

While I have a substantial (for me) holding in the oil sector, I cannot see another bubble until the economy gets back on its feet.

From what I can tell the recent rise in oil price is due to the Chinese deciding that they will make more money holding oil than US Treasuries so they've been using dollars to buy oil. This may be a good idea in the short run, but once they go back to levels based on what they are actually using, I expect we will see crude prices fall.

I also expect that we will see more substitution, using Natural Gas for oil, where possible.

Finally, at $60/barrel, I think coal gasification Fisher-Tropish) becomes viable, and even allowing for carbon capture, we could see this coming on line soon.

Jul 03 01:57 PM

[cyberclark:]

There is no other industry output at this time in Canada except Oil and Electricity!

Coal gasification has a future yes but the amount of capital to install it is almost out of reach and the time to build is nearly as extensive as the pyramids!

Carbon trade is a risk like no other. There is no product, no central controls. If the carbon was being sequestered it may be a banking item but it is not. Carbon is being used to enhance oil recovery and news out now that it may also be used in cleaning nuclear waste. Point is, it is going nowhere but back into the air.

Jul 05 02:17 PM

[Hyperinflation:]

What about silver and gold, Quebec has an amazing gold belt, not to mention silver. You also have the KSM project which will turn out to be one of the largest gold mines in the world, eventually. With massive inflation coming both gold and silver will shine.

Jul 09 03:03 AM