What excuse will be given for a disappointing number tomorrow? Heading into a long weekend, tomorrow’s jobs number will likely have a greater impact than normal. Crude oil has fulfilled our short term targets having dropped 8% in the last four sessions. We are not advocating longs yet but would suggest those short to trail stops down. The only way I would change my mind is if stock indices continue to falter. We do not expect August to close below $69/70. Natural gas was higher by 4.50% with some help from a smaller injection in today’s AGA report. We suggest long exposure in October via futures and option spreads as long as yesterday’s lows hold. With some help from Mother Nature via hurricanes and warmer temperatures we could see a trade above the June highs.
Yes… we left our clients' short ES position too early and left money on the table. Most of my followers realize by now we do not look for home runs and only look to get consistently on base. We believe equities have overshot to the downside and expect a bounce and will look to re-establish shorts for clients. At this time we are thinking a seller near 1070 and a target once short of 950 in the S&P. We will be exploring bearish plays in Treasuries again for clients in 10-year notes and 30-year bonds. At this point yields may be too low and prices too high.
There was an impressive close in October sugar trading 1.37% higher on the day. Use a trade closer to 17 cents to exit remaining longs. Another down day in cotton but prices pared their losses. Trail down stops because if indices bounce we could see a temporary bounce in cotton. We still like having clients short December but maybe taking partial profits after the 4.5% depreciation in recent weeks. Did any listen and get long lumber? Limit up today and an interim bottom likely is in.
We advised clients to exit their short October lean hogs at a small profit expecting to sell again from higher ground. Continue to use the sideways action in live cattle to buy December.
The 20 day MA gave way in August gold today and sellers overpowered the market with gold down nearly $50/ounce. Prices are below the 50 day MA for the first time since late March. We feel prices could drop another $25 -40 before we see buyers re-emerge. Silver prices were lower by nearly 5% trading back to the 100 day MA; a level that has held since mid-March. Some futures traders should have been stopped out when prices violated the 20 and 50 day MAs. Though prices could come down another $1 we used today’s setback to buy some December call spreads for clients. In our opinion nothing has changed in metals, the breakdown today was likely caused by investors liquidating to cover margins elsewhere.
Corn, wheat and soybeans were all higher today, which is remarkable considered the weakness from outside markets. We continue to like bullish plays in corn and would advise investors to work long on setbacks.
The US dollar got crushed today by 1.75%, erasing the previous month’s gains. If this continues, expect strength from all the European currencies. As for the three commodity currencies, we would hold off either direction until next week. Aggressive traders who agree we could get a bounce in indices could look for bearish plays in the Yen.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.