Today in Commodities: It's About Conviction

In this environment it is a challenge sticking to your guns. My feeling is that once you do your homework and put on a position, stay in the trade until the circumstances that got you in the trade change. Try to ignore the noise day to day! That is not to say get married to your position you must evolve as the market dynamic shifts, but if they do not change, stay the course.

We will be out of the office for the next week so we have gone to cash on some positions and put in gtc orders on others. Oil saw little follow thru but we did not have much profit taking after yesterday so the move higher should continue. As we suggested yesterday, $74 and then $76 on the November contract. We are getting the correction in natural gas we called for; we want just a bit more.

Equities drifted lower as we eluded; 990 in the S&P and 9100 in the Dow are our targets. We suggested clients to put in profit orders at 38 O/B on the 1075/1025 put spreads.

Cocoa was lower by $48 today; we are still expecting a trade lower and have put in profit orders. On the January 95/115 OJ calls bought yesterday, sell at 9.50 O/B gtc. On a 15 cent break in corn we would be looking to get long via futures and options for clients on the March contract.

Gold and silver closed back below their 20 day moving averages. We expect a drift lower and advised clients to exit their December $15 puts in silver at 58 points O/B. As money flew out of stocks it flowed into Treasuries lifting prices. We will look at Treasuries from the long side again when we get back as long as equities are moving south. Refrain from new entries short the Euro-dollar for now; we will most likely be selling from higher levels. For clients in the trade the next 2 weeks could be against you.

Livestock was hit today, lean hogs are nearing our buy objective and live cattle was a disappointment but we still like being long. As long as 84.25 holds on a closing basis in December we expect a trade up to 89/90 in the coming weeks.

The US dollar closed above the 20 day moving average once again. We are expecting a move up to 78.40/78.50. That being said, the Euro should chop lower. We advised clients to put gtc orders in on their puts. A move to 1.4350 in December should get a fill. On a trade above 113 we will be exiting the yen for clients.

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

[TonyNed:]

The USD started to form a hook stochastically which has been very consistent in meaning a reversal has been confirmed. I think the dollar moves down from here. Oil's chart looks a little tricky but I think the dollar should help push it higher. I think the fact that the market was down on poor news however oil hung in there means that it's not going down.

The railroad stocks were up most of the day against a bad market. They turned slightly negative at the close but I think this is the rounding of the bottom before the reversal. The downside momentum is as low as it goes. Downside risk is extremely limited.

Oct 01 04:44 PM

[Commies are...:]

Matthew, you called the bottom 4.40. Brilliant! However, are you saying you expect it to go lower at this point (closed above $5.00 today)?

Thanks,

Oct 05 07:51 PM