Today in Commodities: Countertrend Moves

by: Matthew Bradbard

Builds across the board on Crude and the distillates today. Crude traded lower as expected and is down over 3% just above support at $76.50 on the December contract. If that level gives way, expect $75. We do not have clients short but will be looking to get long from lower levels…stay tuned. Trade idea: For aggressive traders buying January mini-natural gas futures with stops below the September lows. We prefer January 50 and 75 cent call spreads at the moment.

Cotton looks to be moving lower, but for now without our clients; we failed to find a trade that made viable sense considering our other trades and the recent sideways action. Corn was lower today but not low enough for us to re-enter longs for clients.

Yesterday's high in the equity market could prove to be an interim top; let’s see how the week ends. Guilty as charged, we are expecting a pullback in gold. We advised buying puts yesterday and are anticipating a quick move to $1086 on the December contract. On that we would suggest booking a profit on shorts. You will notice that although we got clients short gold it was a small position and most taking the trade remain long silver.

Extreme volatility in Treasuries with the auction today. Clients are holding long 30-yr bonds and short 10-yr notes which got hit a little today.

More blood in the cattle today as prices were lower again today with February losing 1.25%. Clients are down but will stay the course. Prices have come off moderately in the cash markets and the recent downturn in the futures have reflected that so things appear to be back in line. On a trade below 84 cents in February we may need to go back to the drawing board. For now stay the course albeit a bumpy ride.

The chart pattern on Euro-dollars screams sell, we suggest scaling into short futures and long dated puts. The dollar raced higher today but stopped at the 20 day moving average, this will be key in the coming sessions; 75.80 on the December contract. As promised short currency ideas: we advised clients to buy January 142 Euro-currency puts today, we also got short December British Pound futures while simultaneously selling December 165 puts. Our target in the Euro is 1.47 and in the Cable 1.6250.

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