Today in Commodities: Don't Fight the Tape

Don't fight the tape - or, the trend is your friend. When putting on a large position try to go the way of the trend. That is not to say playing setbacks and reversals cannot be profitable -- many of my best trades were exactly that -- but position traders generally do not establish bearish plays in a bull or market or bullish plays in a bear market.

A few examples... short the indices, a trade our clients are in may not be the best call. Picking a top in gold or silver could be suicide in this environment.

Now for some markets. Natural gas has reached our first downside objective at $4.40 in November, see previous posts. This is a 38.2 % Fibonacci retracement, 50% at $4.25, 61.8% at $4.06. We suggested oil traders to book profits on their longs though there may be a little more upside. We will be looking to get long January or February on a retracement for clients.

Softs were a non event with the exception of lumber which traded up limit for most of today’s session. On the highs we touched the trend line dating back to mid-June on the November contract. Look for a break out. A fresh 09′ high in indices, no interest I am a non-believer. Congratulations to those that have weathered the sideways market for the last decade. No doubt a stock pickers market no longer a buy and hold.

We will be looking to buy more wheat and corn on a setback if and when. We advised clients who still own December corn calls to step to the sidelines today because of the impending time decay. Additionally, being we feel too much weather premium has been built in on recent sessions, we will take a shot and buy December oat puts for clients anticipating a quick 15-25 correction.

Gold slightly lower, silver slightly higher. You know where we stand. Long term screaming buy and short term close your eyes and hang on.

As the 40 day moving averages gave way and equities advanced Treasuries collapsed. Targets on the 30 -yr 117′16 and 10-yr 117′00.

Live cattle had a nice day today, still wanting a close above 86.00 in December before adding to longs. US dollar down and int’l currencies up, this rubber band is really stretching. Hold off on new entries.

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

[Macro_Man:]

Don't know about Gold mate, could be topping. Had a reversal day. Maybe the first of many, maybe indicating near term top is in place

Oct 14 03:55 PM

[rrdaniel:]

Any thoughts on sugar ? Still going long ?

Oct 14 04:20 PM

[Melsen:]

By your way of writing I guess you haven't gone long NG yet. I agree with you and in order to go long I'll wait for at least a 50% retracement. Considering the way it's going even a 61.8% would be in the playbook I think, that would put the December contract in the range of $4.50-$5 that we've been trading on the November contract. Crude IMO will reverse shortly. If it can't get a convincing bid over $75 under these conditions, when will it? Gone short crude today with a tight stop, just in case it rallies all the way to $80. Do you think that was too much of a risk?

Oct 14 06:38 PM

[rick12345:]

Market is heading into overbought territory, while the US dollar is "severely" oversold. Be very, very careful in this environment. Treasuries are sick at the moment, so I would expect the reserve to act soon. A lower dollar, while good for the trade deficit, is not positive news for inflation or struggling small businesses - prices and wages increase while margins tighten; a recipe for disaster.

Oct 14 09:30 PM

[Matthew Bra...:]

We are positioned long in the March 10' contract for clients expecting a re-test of 25.50. We will remain long as long as prices do not trade below 21.00.


On Oct 14 04:20 PM rrdaniel wrote:

> Any thoughts on sugar ? Still going long ?

Oct 15 08:40 AM

[Matthew Bra...:]

Yes we concur nat gas is a buy if prices come down just a touch more...see previous posts. In terms of crude we prefer to buy a setback as opposed to get short. If you chose to get short DO use a tight stop. On a trade out of the bollinger bands on the daily chart which is just above $76 on the November contract we would take a loss. If you do get a break trail your stop lower.


On Oct 14 06:38 PM Melsen wrote:

> By your way of writing I guess you haven't gone long NG yet. I agree
> with you and in order to go long I'll wait for at least a 50% retracement.
> Considering the way it's going even a 61.8% would be in the playbook
> I think, that would put the December contract in the range of $4.50-$5
> that we've been trading on the November contract. Crude IMO will
> reverse shortly. If it can't get a convincing bid over $75 under
> these conditions, when will it? Gone short crude today with a tight
> stop, just in case it rallies all the way to $80. Do you think that
> was too much of a risk?

Oct 15 08:44 AM

[jimbo's gra...:]

"When putting on a large position try to go the way of the trend. That is not to say playing setbacks and reversals cannot be profitable"

Once again you cover both sides. Can't any of you "experts" simply take a strong stand on something without providing yourselves with an outlet??? I can see it now.... next month's article will say "yes, I did say play the trend in my article last month but I also said "that is not to say playing setbacks and reversals cannot be profitable". Beautiful! I wonder if I can make money offering similar advice on pro football betting lines. "Well, I like the Giants over the Saints giving 4 points but that's not to say that the Saints can't win the game outright." Awesome, solid, unwavering advice. That's what I really love about you so called "experts." What a joke. Can someone buzz me when an "expert" with a solid stand on something shows up? Thank you.

Oct 15 02:07 PM

[Melsen:]

Hahaha you and people who think like you and act as keyboard warriors are a joke. If you read carefully, all Matthew means is that you should go long gold or silver (since that's the trend) but watch out for a reversal so you can benefit from the downside as well, if that reversal happens. Simple enough! Now for the "experts" you attack, everything in the market is fluid so one ought to cover himself if something goes wrong. That's how you win in the long term. I guess you wouldn't know that, judging by how angry you are (probably because you've lost money). I actually respect this guy because he takes clear standpoints. Much better than some full service brokers that you pay and give you the "I can't say what's gonna happen in the next couple of weeks, but long term I'm bullish/bearish x". Don't you think that if financial advisors could be right on every single trade, they'd be too busy making serious coin for themselves instead of providing advise?

Oct 15 02:32 PM

[picman:]

" I guess you wouldn't know that, judging by how angry you are (probably because you've lost money)."
I went into SLV at $15/sh so how do you figure I've lost anything?
... and unlike most of these "experts" I'm in it until it hits at least $20 and I am very, very strong on my opinion that it will. That's all I'm asking from these guys. Give me your strong positions and stop covering your behinds with a lot of nonsense that essentially says nothing,

"I actually respect this guy because he takes clear standpoints."
No he doesn't. He gives an opinion and then covers his back by saying, "but I don't count out a trend the other way." These guys are like weathermen, they get paid and offer general (usually inaccurate) mumbo jumbo. "Today it will be partly cloudy with patches of sun and a chance of rain off and on throughout the day." Gee thanks... now I can plan my day. These so called stock experts do the same thing. They offer general thoughts with a backup plan so in the end they can tell you I told you so. That's not to say that Matthew or any other "expert" doesn't have some good points but far too often they take both sides which ultimately winds up being no advice at all.


On Oct 15 02:32 PM Melsen wrote:

> Hahaha you and people who think like you and act as keyboard warriors
> are a joke. If you read carefully, all Matthew means is that you
> should go long gold or silver (since that's the trend) but watch
> out for a reversal so you can benefit from the downside as well,
> if that reversal happens. Simple enough! Now for the "experts" you
> attack, everything in the market is fluid so one ought to cover himself
> if something goes wrong. That's how you win in the long term. I guess
> you wouldn't know that, judging by how angry you are (probably because
> you've lost money). I actually respect this guy because he takes
> clear standpoints. Much better than some full service brokers that
> you pay and give you the "I can't say what's gonna happen in the
> next couple of weeks, but long term I'm bullish/bearish x". Don't
> you think that if financial advisors could be right on every single
> trade, they'd be too busy making serious coin for themselves instead
> of providing advise?

Oct 15 02:50 PM