Today in Commodities: The Perfect Game

September crude attempted a move to $69 today and barely fell short. The path of least resistance remains up but we expect some back and fill, so those long, we would lighten up or tighten stops. Our preferred energy play remains natural gas, we’re advising new purchases to split their fills between October and November.

The US dollar was lower again today but we maintain that a base is being built for a move to the upside. Our target is 81/81.60 on the September contract.

December corn closed back over the 9 day moving average, we are buying clients $3.80 and $4 calls expecting a move to 3.50/3.70 in the coming weeks.

We suggest some exposure long metals, we prefer silver to gold. Prices on the September contract traded over $14 for the first time in the month of July today. The daily chart is starting to look a bit toppy but the weekly remains a buy and hold. By the end of the year we expect a print of $17/18 ounce but we could get a setback if our assessment of the dollar is correct.

We advised clients to cover their short futures in August lean hogs today and to hold the 62 calls for a bounce. October live cattle tested the 20 day moving average, we may get a bounce but ultimately we are still looking for 180/200 points on the 86 puts for clients. Coffee was slightly higher today, cocoa slightly lower. We booked profits on the cotton today for clients, filed at 220 points; $1100 per. Paid $600 2 weeks ago. How many did you own?

Comments

[Larry House:]

I hope silver does pull back; it would be a good time to fill up the truck. When I am watching for a buy price (about 12.50 this time), it rarely happens. But I can hope.

Jul 27 03:40 PM

[speeddaimon:]

You said "The US dollar was lower again today but we maintain that a base is being built for a move to the upside. Our target is 81/81.60 on the September contract."

I want to know what events or news is going to precipitate this climb? Will the Fed announce they're going to raise interest rates? Honestly, how much in bonds is the US selling in August? Who has any confidence in the continuing strength of the USD?

Jul 27 04:08 PM

[TonyNed:]

I believe the dollar price action he is speaking of is purely technical. I wouldn't say with confidence that the dollar is basing there seems to be more room to the downside available.

I don't believe natural gas is a good short term play. I would wait before purchasing any future month contracts. It looks as though natural gas has not turned bullish and may have another leg down.

Actually, I think the whole market is set for a selloff. All the commodity plays are way overbought. Any news this week cannot possibly act as a positive catalyst. I believe repricing of risk has taken place and increased expectations are priced in for the upcoming earnings.

Jul 27 04:51 PM

[Belome:]

Tonyned I believe your right on, plenty of hot air under this bad boy right now, especially in commodities. I agree that the dollar will bottom soon (for a month or so) but that cannot be bullish commodities in any way...can it? I appears the funds are playing the get long corn sell beans game one day and then sell corn buy beans the next. We are in a consolidating range right now. Beware of the August 10 Gov. report that will most likely increase corn and soybean yields and increase planted acres that were missing from the March report. If oil goes back down and hurts ethanol margins, corn could be in for a nasty move lower...10-20% by the end of September. I would love to load up on DAG at that point.

Jul 27 06:57 PM

[Dr. O:]

I think the governmental-financial complex has clearly opted for inflation over deflation; the implications are for a lower dollar, higher commodities, and higher stocks. Clearly we've begun the move in that direction since March.

If you're betting on deflation with lower stock prices and lower commodity prices and a stronger dollar you are betting against all the major central banks in the world. I'm not comfortable making that bet.

Jul 27 08:02 PM

[-osgo-:]

Don't forget the risk-premium on fuels right now (Iran); I'm of the opinion that that's the only thing propping up oil & gas.

From a nature/forecast perspective, gas/kerosene/heating oil oughta be a nice long play later on this year and next. Check out the sunspot activity (yes, really) -- we're entering a cold period, and statistically this has created "Little Ice Ages" with ensuing colder temperatures (and need for propane/natgas/heating oil).

Add Venezuela going ape%$#@ in defense of Iran should the Israeli's attack and we'll see commodities skyrocket in flight, no afternoon delight, folks. The time frame is spot-on.

-osgo

Jul 28 08:52 AM