Today in Commodities: Market Hangover

by: Matthew Bradbard

Too many shots, too many pints, too much corn beef and cabbage? Markets did a whole lot of nothing today.

$83-83.50 is still acting as stiff resistance on the May Crude futures; use that as resistance, and $79.50 followed by $77.50 as support. Though there is far more profit potential being short or long futures in oil, at the moment we prefer sleeping at night and have advised clients to trade options until we get a clearer direction, if they intend holding overnight. We are still thinking a setback of $4-6 is likely in the coming days/weeks and have not ruled out a trade back to $70/barrel.

Could a 5% down move today be the capitulation low that natural gas needed to find a bottom? Being prices are this close on the front month, it is likely to challenge a trade below $4. Prices have not seen that handle in 7 months. Clients were advised to put in limit orders to buy back the top leg of their June call spreads today. It would take a slightly lower trade to get filled.

Sugar has put in two consecutive positive showings for the first time in a month. Let's try this again… as long as prices do not close below 18 cents on the May contract, we like being long very lightly, as we’ve been burned before. Assuming this low holds, a trade back to 23 cents could happen quickly. A safer play could be to trade spreads or options as opposed to futures.

OJ traded a nickel lower intra-day but managed to close above a trend line that has held since last fall. We would like to see more downside, and should, if we can break the aforementioned trend line. Clients exited their May soybean oil puts at a loss of $90/per. Corn is back above the 20 day moving average and as we indicated yesterday, we like being long. We are looking for a trade back to the previous resistance in the coming weeks to month; about 60 cents above today’s close. Live cattle was a gainer by another 1.5% today to fresh highs; though it is tough, hold off selling until we see signs of a top.

Gold and silver remained range bound again today with silver off a touch and gold inching higher. The dollar raced higher today taking all other crosses lower with the Euro getting hit the hardest. Roles have once again shifted and now the Euro and Pound are a sale on rallies as opposed to a buy on dips. Our lone currency play is short the Loonie; an interim top perhaps yesterday?

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