Today in Commodities: Waiting for a Catalyst

The majority of the markets I trade seem to be waiting for some sort of market moving event --??

Crude was a loser of 3 plus percent today. No chart damage as of yet, but on a breach of $69 on the November contract, shorts could pile in. We are cautiously long with clients in December call spreads ready to take action if needed. Natural gas has been sideways for the last 4 sessions with an inside day today. We expect a moderate sell off where we will be getting clients long again.

US dollar up, Euro-currency down that is what we expect. That being said, we’ve been gaining short exposure anticipating 1.4250 in the coming weeks. Use the 20 day moving average as the pivot point for your currency trades. Sideways trade in the Treasury complex, look for the FOMC for guidance.

In our commodity update this morning on a hedge we’ve suggested ES (mini S&P) puts for clients holding large stock portfolios.

The path of least resistance in coffee, cocoa, cotton and OJ seems to be down in the short run. Look for trade ideas in the coming sessions. Clients got short cocoa today in a December back spread; selling (1) 2900 put and buying (3) 2750 puts expecting a trade down to 2850.

Gold and silver were lower but did manage to pare their losses in late dealings. We remain on the sidelines with clients thinking a large correction is coming.

Cattle and hogs traded lower today; we are suggesting longs in live cattle and will be buyers on lean hogs from lower levels for clients. Corn and wheat were quiet today, though soybeans were lower by almost 3%. The longer corn and wheat dance around these lows, the stronger the base forming will be. Do not overcommit, but we do suggest light long exposure via futures or options. On a trade over 20 cents in the KCBOT/CBOT wheat spread we will start looking for an exit.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Comments

[market ace:]

Interesting that you are looking for a big correction in gold and silver when in looks like the shorts are about to be hung out to dry in a major squeeze

Sep 21 04:11 PM

[Mark Bern:]

If you expect the $US to fall against other currencies, how can you expect a simultaneous correction in industrial commodities? Or am I misreading your article?

Sep 21 04:24 PM

[TonyNed:]

Technically the dollar has carved out a nice bottom and it looks like it has the potential to put in a nice rally. I would be on the sidelines of any commodity until there is either a slight pullback or some sideways action which clears the overbought momentum.

Sep 21 08:15 PM

[rick12345:]

"The majority of the markets I trade seem to be waiting for some sort of market moving event --?? "

I think this might be the 20% breach of an 8000 bottom that took place in March of this year. The actual bottom of 6547 that occurred on March 9, 2009 is still seen by many people as a pseudo base, spurred on by comments about the global economy shrinking for the first time since world war 2. This is yet to happen and with economies around the world now showing positive growth, it is unlikely that it ever will. That is of course unless the USA doesn't stuff things up again ; just kidding guys. I know you're trying your hardest, even though the republican party in your country is trying its hardest to derail the process. F#@K am I glad they won the election!
Anyhow, getting back to my point. If the DJIA rises another 1%, which it could well do today, this would indicate, unequivocally, the end of the bear market.

Sep 22 06:57 AM

[Ryu Mei Co:]

The catalyst, imo, is each central govern wanted a strong dollar. Since there is no alternative to USD, expects the USD to either strengthen or stay at this low level till G20 talk their way out of the global mess.

Sep 23 12:51 AM