Dollar moves lower for the fourth day in a row, like longs in gold this trade seems to be getting crowded. We are not calling a bottom but we would not rule out a quick snap higher to stop out the late comers. We currently have no currency exposure for clients with the exception of a very light position in a December Euro-currency put spread. Stand aside on new entries in forex for now.
OPEC’s meeting will extend into Thursday. We expect no action taken but with a weakening dollar Crude is theoretically already higher. We remain long with clients in December $75/80 call spreads. If October musters a move above $72 expect $74.50. We bought more December $5/6 call spreads in natural gas for clients Wednesday at $2400. An interim top in gold…perhaps, it is too early to say. December could correct to $970, which was the previous resistance which now will be support. We remain long silver with clients.
For new entries before we potentially get a move to $19/ounce we may get a wash out to $14.50/$15; this would be the new buy window. We suggest March 10′ contracts on new entries. Sugar avoided a third consecutive negative day to fight back and close higher. We suggest using the current set back to be a buyer. We will put in a limit to exit the recent coffee play for clients at 400 points O/B, just better than 150%.
Clients are not filled and need 2/3 cents higher in December to exit. In Treasuries we have some clients long 30 yr bonds; 122/126 call spreads and short long dated Euro-dollars. This sideways consolidation should prove to be an interim top. We are buyers of March corn futures into Friday’s report. Rumors are out there of a smaller yield. One source brought to my attention by a farming client of ours uses satellite imagery and has a projection of 154 on corn. Against the futures we suggest some at the money October puts. Live cattle higher for the third day running, lean hogs higher now for seven sessions. We maintain that commodity portfolios should have bullish exposure in livestock.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.