Though Crude held the 9 day MA, we did not like the price action. Those long could stay long, but we suggest trailing stops as a settlement below $77.70 on the August contract signals a break lower. We advised our clients who were long to exit at a small profit and move to the sidelines. Additionally we do not like having too much exposure in any one sector and we started buying natural gas for most of our clients that trade energies. Today they were buyers of October 50 cent call spreads. We expect within that time frame to see a trade to $6 BTU.
It was an inside day in indices though we still expect a trade above the 20 day MA in coming sessions. In a perfect world we get a trade closer to 1100 in the September S&P to re-establish shorts for clients. Treasuries hit a new contract high today; some clients will be playing defense looking for a retracement to cut losses on their remaining August bond puts.
October sugar posted a bearish engulfing candle today, closing 5% off its intra-day high. We suggest using rallies to exit any remaining longs. We would again be operating under the premise October is a buy below 15 cents and a sale above 16 cents. We continue to like bearish futures and options exposure in December cotton. Aggressive traders can start scaling into September lumber as long as the recent lows hold.
While we think there is more upside in live cattle we trimmed some of our clients' longs in live cattle to get them short lean hogs. We feel we could be in and out of their hogs before we see much movement in the cattle trade. Those not willing to move: we still are bullish live cattle but it may take some time to develop. Live cattle were marginally higher today as lean hogs were lower by 1.47-2.23% depending on the month. As we said last week, aggressive traders should be short August and trailing stops to protect their profit. Today some clients established bearish plays in October expecting a trade below 73 cents.
Gold’s $28 trading range has me thinking a correction is due but until the trend line and 20 day MA give way we must respect the trend; that level is $1235-37 in August. Clients have NO exposure. September silver failed to follow thru after making a new high closing down 1.81%. Traders that are long futures we recommend trailing stops. Our featured options play for those bullish silver is December $20/25 1:4 call spreads.
Mixed bag in grains with corn and wheat down and soybeans higher on the day. We advised clients to pull their orders on the CBOT/KCBOT wheat spread until the USDA report Wednesday. Aggressive traders could buy December soy meal with stops below $257. We continue to scale into longs in September corn options and December futures for clients. While all traders know past performance is not indicative of future results, the last two occasions corn was at these levels buying emerged. Aggressive traders can use the 0.50% rally in the Pound to fade with tight stops as we think prices have gotten ahead of themselves.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.