The markets resumed trading today after the long holiday weekend, but based on the large swings it would appear that not everybody is back from holiday. Crude oil near $3 trading range has traders still deciding on what direction from here. We would still not rule out a test of the May lows about $3 below the current levels. It would have been a more convincing case if the bulls could muster a rally today with the dollar's weakness. Clients likely will be looking to gain long exposure in the coming sessions in September and October contracts. Natural gas is still fighting to get back above the 20 day MA; in August that level is $4.86. We’ve suggested clients to stay long as long as the $4.50 level supports in August. Our favored play is purchasing 50 cent call spreads in October.
We’re expecting a dead cat bounce in the indices and will be prepared to sell the S&P for clients closer to 1055-1065. We would refrain from trying to pick a top in Treasuries, though we think this trade will have its day. Wait for signs of an interim top as opposed to trying to outsmart this market.
October sugar failed to get above 17 cents today; the 100 day MA comes in at 17.05 and may serve as stiff resistance. Traders remaining long should look for an exit door on a probe above 17 cents. December cotton was lower by 1.60% today, making today the seventh consecutive losing session. Trail stops on futures and on a trade near 73, put option holders should be looking to take profits. Coffee was lower by nearly 3% today, closing below the 20 day MA. Lumber traded down limit today; recently-bought November call options were hit, but this is a trade we expect to have clients in for several weeks. Live cattle were higher on the day but well off their highs; in early dealings December hit a six week high. Continue to scale into longs in December live cattle. Continue to sell rallies in October lean hogs; the 20 day MA at 75.00 should act as a ceiling on rallies.
August gold was unable to take out the 50 day MA at $1215, closing $15 lower at a new five week low. Clients have NO exposure though we expect a trade to $1165-1175 in the coming sessions. If so and that level holds, clients may establish longs… stay tuned. September silver held up a bit better, closing just below the 100 day MA. Perhaps it's premature, but we’re advising clients to scale into longs in September silver and to purchase December call spreads. We view $16-75-17.25 as solid support and have an upside target of $19.50.
December corn closed back below the 100 day MA just over 20 cents from its highs. We would suggest using this set back to scale into longs; as we’ve said in recent posts we expect to see at least a partial fill of the gap from last week's USDA. A 61.8% Fibonacci retracement puts December closer to $3.60. From lower levels we should have some buy objectives in November soybeans, September wheat and December soy meal… stay tuned.
On our radar in currencies is selling rallies in the Swissie and buying dips in the Loonie. Our objectives are .9200 in the Swissie and .9650 in the Loonie.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.