The indices trading higher should mean the dollar and Treasuries down and most commodities up. That is how we have positioned clients as you can read below. Oil is thru $76 trading near a one month high. The momentum is up but if you are not already long we would not suggest fresh entries at these levels. The market feels like it has another $3-5 left in it but if the dollar was to rally or the indices were to run out of gas, the most recent $7 advance could reverse on a dime. Those already in the trade continue to trail stops. Natural gas cut thru $5 with ease gaining an additional 3.50% today lifting prices to 3 1/2 month highs. We suggest long exposure in September on a set back but at these levels we would be chasing the market. Filling the gap from two days ago would take prices back to $5.79; use that as a buy objective. Indices are above the 200 day MA’s and appear to be moving higher. Our upside objectives are as follows: in the S&P 1125 and possibly 1145 and in the Dow 10475 and then 10635. If we see a trade at those levels we would start unwinding all longs and start reversing for clients.
If sugar were to retrace 4-6% we would look to re-establish longs in October for clients. Aggressive traders could continue to sell December futures in cotton with tight stops. We prefer buying December puts with our clients. September coffee has advanced 19% in the last three sessions on freeze concerns in South America. If this is true expect much higher pricing, if this proves to be a false alarm prices could come down as quick as they advanced. Clients have NO long or short exposure currently. Treasuries made a new low for the week and in our opinion poised for a trade lower. Clients are in NOB spreads anticipating 120/121 in September 30-yr bonds. Live cattle traded to a one week high; this could be the beginning of the next up leg. Traders are advised to buy December options and futures. The 20 day MA and trend line are acting as solid support in August gold as prices gained 0.80% today. Clients' exposure is December $75 call spreads anticipating a new high. July silver hit a two week high today inching closer to $19/ounce. In the coming session if prices can get thru $18.90 we feel $19.30 should follow. On that we would likely lighten up on longs and advise clients to tighten stops. Additionally we would use that window to roll from July to September for clients. A move of 40% in oats in five days we feel is unsustainable, that being said we lightly bought July $2.50 puts for clients for $200 expecting prices to retrace in the next 10 days. If you follow us on the trade we have a target of $450-500/per. December corn gained for the sixth consecutive session today…continue to add length as we think prices have an additional 40-60 cents of upside. If the indices continue higher we would expect the Yen to breach 1.08 this week. Traders long the Euro from yesterday our target is 1.2525-1.2600 this week.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.