Today in Commodities: Potential Reversal Looming

by: Matthew Bradbard

An inside day in Crude as prices look to close slightly higher. We have no exposure with clients but expect prices to drift lower in the short run. Inventory report out tomorrow a day later than normal on Crude and the distillates and on Friday for natural gas. As previously stated we expect the September lows in natural gas to hold and we’re advising clients to buy 50 and 75 cent January call spreads.

Sugar screamed higher today regaining the trend line closing 3.5% higher on the day. December cotton made a new high and failed closing 2.5% lower on the day. We’re pricing out bearish plays for clients… stay tuned.

Equities may be starting to roll over, we’ve yet to make a move but we’re getting close. If the S&P fails to close above 1100 in the coming sessions we most likely will get short via futures with a tight stop or back ratio spreads.

Gold made a new high again by another 1% today. It just doesn’t feel right; we suggested December $1075 puts today for $300. We are anticipating a $30-50 break. The question is if 12 days is enough time? A majority of the clients that took that trade are long silver with a nice profit, so it is also a slight hedge as both metals seem to be moving in the same direction. We advised clients to book a profit on their long March corn futures and options. We are still bullish and will look to be a buyer again on a setback. The NOB spread (long 30-yr bonds and short 10-yr notes) appears to finally be working.

Our bullish cattle trade for clients has yet to materialize but we will stay the course. Continue to gain long exposure via futures or options in February live cattle.

As tomorrow is the last day of the Goldman roll we want to have light exposure and will add to the trade for clients once they are profitable. 75.00 in the dollar index remains the line in the sand. The Pound has rolled over and we feel an interim top has formed…sell rallies. Aggressive traders willing to risk to 1.5100 in the Euro-currency could get short. We should have some additional bearish ideas very soon.

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