Today in Commodities: Trade Off the Indices

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 |  Includes: BAL, COW, DBA, DBC, DIA, FXA, FXF, GLD, JJA, MOO, QQQ, SGG, SPY, TLO, UDN, UNG, USO
by: Matthew Bradbard

To me virtually everything is trading off the indices, so look to the equity market for guidance and positioning. Crude was higher but I’m not convinced the damage is done just yet. If the 9 day crosses the 20 day, which would mean prices would be $1 higher in futures, I will likely get clients positioned long again. Much of tomorrow's action will depend on the inventory report…stay tuned. We suggest backing off on the distillates until Crude oil picks a direction. Natural gas failed to get thru $5 today closing down 2.30%. At this point we’re feeling a correction back to $4.40-4.60 should be bought. We will have specifics in August and September contracts if we do get that retracement.

The fact that indices made a new low and failed to follow through mean we should get a bounce from here… a dead cat bounce. We would start to explore shorts in the S&P above 1180 but if lucky we may get an opportunity to be a seller back above 1100 for clients. If the equity market for whatever reason stabilizes and trades higher, that should bode well for some of the beaten down commodities… stay alert.

Sugar was higher by 3.84% today, closing in on 15 cents. Clients remain long October, expecting another 7-13% .Futures traders are advised to fade this rally in cotton. We feel December is a sale as long as prices remain below 79 cents. If the September low continues to hold in corn and the USDA revises down the corn crop on Thursday as rumored, this week could prove to be the bottom in corn. Clients are long September and December corn and wrong but holding, thinking we’re close to turning higher.

Ideally traders liquidated the remainder of their shorts in lean hogs as prices look ripe for a bounce. Traders with more than a 60 day time horizon should continue to scale into longs in live cattle.

Aggressive traders could be short 30-year bonds, 10-year, 5-year or 2-year notes as long as no new highs are made. We’ve yet to make a move for clients, but once we are out of some of their metals we will gain exposure. Expect bearish trade recommendations to come.

Gold made a new record high today but is down in after hours trading. We’ve reached a pivot point and expect a $50 leg in the coming sessions. As it stands now, clients are positioned thinking that leg will be higher. A settlement above $1250 or below $1215 should signal the direction of the move. Silver traded above the 200 day MA but closed just shy of that mark. Clients are positioned long, thinking $19/ounce is in the near future.

The dollar looks heavy but we would need to see confirmation to add any additional exposure for clients. As it stands now, some of our clients are long the Aussie and the fact that .8100 held today they have a chance of seeing a trade back to .8500-.8700 in the coming weeks. The Swissie looks like a buy as well; aggressive traders should get long with stops under .8575. A 38.2% Fibonacci retracement would lift prices to .8940.

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