Today in Commodities: Last Gasp for Indices

by: Matthew Bradbard

Indices approach the 50-day MA and then fall apart… that is our prediction. For now the 200-day MA appears to be acting as support in the S&P but if it were to give way we may advise clients to get short from lower levels. We have not made a move just yet, but we’ve told clients above 1130 we’re interested in getting short exposure via futures and put options… stay tuned.

We advised clients to exit all longs in oil today. It was an inside day and we expect prices to back off; on a $3-5 setback we would re-establish longs. The 9 and 20 day MAs should serve as solid support; those levels in July come in at $74.80 and $73.25 respectively. The correction in natural gas only lasted one day with prices rebounding today. We may miss this trade but are not willing to commit capital until we get a correction. Traders more aggressive than our clients could be long as the trend has clearly reversed, but we are advising clients only to buy on a pullback.

October sugar closed below the 9-day MA for the first time in nine sessions; another 2-4% decline and we will be shopping longs for clients again. Unless things change we want to be a buyer closer to 15 cents and a seller closer to 16.50 cents. Aggressive traders should continue to gain bearish exposure in December cotton. Coffee had its first down day in eight sessions, losing 1.50% today. $1.60 could prove to be an interim top… stay tuned, we may have some bearish ideas to come.

Treasuries moved higher today against our clients. We will weather the storm thinking this rally will reverse into next week. Clients are in NOB spreads (short 30-year bonds/long 10-year notes). As of this post today’s action hit the position for $600 per spread.

Cattle on Feed report comes tomorrow after the close, with large numbers expected. We suggest scaling into longs in December live cattle and owning 25-40% into tomorrow’s number.

August gold briefly penetrated $1250 today, closing higher by $16/ounce. We expect a new record high tomorrow or next week and will be looking to lighten up on a trade closer to $1300/ounce. Silver traded to a four week high inching closer to $19/ounce. A higher trade tomorrow should lead to an attempt at the May highs above $19.50.

December corn failed to close above the 40-day MA for the second day in a row. Short term we could see an 8-12 cent retracement which we would suggest buying September options and December futures on. If long soybeans and/or soy meal we would suggest taking a profit and moving to the sidelines. If you got filled on the wheat spread, take it off at a small loss ($150-300 per). If you followed us on the July oat puts, place a gtc profit order at 10 cents. Oats were down 3.24% today and if they fill the gap from three days ago tomorrow we should be close to our profit objective, a 120% return.

We advised clients to take a profit on their long Euro-currency today; though it may be premature, the Yen position was moving against them and we wanted to add to the shorts in the Loonie and did not want to have too much exposure in currencies. The Yen broke out to the upside today and clients unfortunately own puts. A total loss would be a loss of $400 per but they still have one week. Clients were buyers of August Loonie puts today who did not already have exposure with a target of .9550 in the futures.

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