Today in Commodities: Monday, July 6

The story today was more sellers than buyers as most commodities traded lower.

We had suggested to clients that oil looked heavy and could make its way to the 50 day moving average, which happened today. For new long entries we expect the $62 level; 50% Fibonacci retracement level to hold. Our pick in the energy sector remains natural gas. October traded to a new low today at $3.72. Though we are not suggesting futures yet, we continue to advise the purchase of $1 call spreads.

The dollar was bid higher in the morning but gave back most of today’s gain before the close. Aggressive traders could be long the yen or Loonie at this point. See our commentary from this morning for more precise trade recommendations. Continue to scale into shorts in the Euro-dollar.

Gold and silver are buys right here… right now… in my opinion. We’re suggesting $100 call spread in October gold and $3 call spreads in December silver. All clients that have bought in recent weeks are down on the trade but agree months from now this strategy will pay off.

The path of least resistance remains down in agriculture, we are looking for a sign of a bottom to be a buyer of December corn but sit on your hands for now.

Sugar most likely will be a buy this week but for now we are spectators. See our coffee and orange juice trades in our commentary. OJ was higher by 8.5% today on rumors of a tropical storm, g-d forbid we actually get some activity.

Comments

[woodennickels:]

more sellers than buyers? how is that possible?

Jul 06 04:41 PM

[spald_fr:]

We're going to see $2.50/gal gasoline again in the USA.

Jul 06 05:31 PM

[montanamark:]

I agree particularly with respect to silver. the beating in the metals is
not supported by the weak dollar bounce. the people who are selling gold and silver now and the ones that were late to jump on the bandwagon a few weeks ago. they bought hi and late. just speculation but it appears some funds fall in this category and now they are chasing GIS and K. herd movement

Jul 06 07:53 PM

[BPYHO:]

Mathew B - Keep up the good work with your columns. Just curious why your pick is Nat gas? It seems as though everyone and their mother was recommending Nat gas 2 weeks ago and it has been absolutely crushed the past two weeks. Please tell me you see good things on the horizon!
Signed,
a sucker who bought into the Nat Gas bandwagon....

Jul 06 09:57 PM

[Matthew Bra...:]

Woode nickels
There are an equal number of buyers and sellers, it is a play on words. When the market is down it is assumed there were more sellers and when the market is up more buyers...comprendo.


On Jul 06 04:41 PM woodennickels wrote:

> more sellers than buyers? how is that possible?

Jul 07 08:17 AM

[Matthew Bra...:]

Natural gas is at a 7 year low so it is cheap. Because the down move the premium has been sucked out of call options so I feel they are a bargain. We are in midst of hurricane season so we may get some fundamental help. Traditionally buying natural gas in mid-July and holding until mid-October has workded; 17 out of the last 18 years. Past performance is not indicative of future results. Historically the ratio of crude:natural gas is 8 :1, it is currently at 18:1. It is for these reasons I'm advising clients to take a long position in natural gas.

On Jul 06 09:57 PM BPYHO wrote:

> Mathew B - Keep up the good work with your columns. Just curious
> why your pick is Nat gas? It seems as though everyone and their mother
> was recommending Nat gas 2 weeks ago and it has been absolutely crushed
> the past two weeks. Please tell me you see good things on the horizon!
>
> Signed,
> a sucker who bought into the Nat Gas bandwagon....

Jul 07 08:22 AM

[E-Rsch:]

Matt:

Are you referring to the spot prices (7Y low, 50D moving ave) or the futures contracts (1M-,2M-,3M-) of these commodities?

Thanks!
On Jul 07 08:22 AM Matthew Bradbard wrote:

> Natural gas is at a 7 year low so it is cheap. Because the down move
> the premium has been sucked out of call options so I feel they are
> a bargain. We are in midst of hurricane season so we may get some
> fundamental help. Traditionally buying natural gas in mid-July and
> holding until mid-October has workded; 17 out of the last 18 years.
> Past performance is not indicative of future results. Historically
> the ratio of crude:natural gas is 8 :1, it is currently at 18:1.
> It is for these reasons I'm advising clients to take a long position
> in natural gas.
>
> On Jul 06 09:57 PM BPYHO wrote:

Jul 07 09:02 AM

[Matthew Bra...:]

I am talking about the August contract, front month futures.


On Jul 07 09:02 AM E-Rsch wrote:

> Matt:
>
> Are you referring to the spot prices (7Y low, 50D moving ave) or
> the futures contracts (1M-,2M-,3M-) of these commodities?
>
> Thanks!
> On Jul 07 08:22 AM Matthew Bradbard wrote:

Jul 07 09:46 AM

[E-Rsch:]

Thanks, Matt for clarifying. Can you trade off of the front month futures for the same commodity? Is there benefit in knowing what the 5D, 50D moving averages will be? Or, would knowing how large (or bad) these moves in front month futures contract prices can swing beneficial to traders? Change in time to maturity would not be a factor when you are looking at changes in front month contracts...

Jul 07 12:23 PM