Today in Commodities: Where Next?

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 |  Includes: AUNZ, BAL, COW, DBA, FXA, FXC, GLD, GRU, JJC, MOO, SGG, SLV, UNG, USO
by: Matthew Bradbard

Markets seem to be waiting for some type of catalyst to determine the direction of the next leg. It was an inside day in Crude oil as prices hover around $82/barrel. For new entries we still like the idea of $5 put spreads, but we would start looking at the June as opposed to May contract. If currently in the May, we would try to buy back the bottom leg; we have suggested for clients to buy back their $70 puts and that would leave them long the $75 puts. It was a disappointing day for longs in natural gas as yesterday could prove to be just a head fake. Clients remain long via April futures and June call spreads as prices were off 2.4% today.

As of this post, indices are at the high of the day; we think we are close to an inflection point but we’ve been wrong for the past two weeks. If the S&P closes above 1148, exit short futures at a loss. It's been a fourth consecutive down day in sugar but we are assuming yesterday’s low at 18.82 in May will serve as support. May cotton has lost 3.8% in the last 5 session and closed below the 20 day moving average for the first time since February 8th. We are expecting another 2-4 cents and will then be advising clients to lift shorts.

Corn was flat on the day while wheat was a small loser and soybeans gave up almost 3%. A larger crop from South America could pressure soybeans another 30-50 cents. Clients are long July soybean meal and down, but we are looking for prices to rebound within that time frame, we may average in next week. Additionally they own puts in May soybean oil and should be able to book a profit next week on a move under 39.00 in May.

Trail stops down if you are short lean hogs; if the 9 day MA gives way we should see a trade under 70.00 cents in April.

It's a mixed bag in metals; we are still anticipating a trade lower in gold, silver, and copper before we see any substantial upside. The Commodity currencies (Kiwi, Aussie, Loonie) look vulnerable; clients remain short the Loonie expecting a trade under .9500.

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