Today in Commodities: All-Stars

by: Matthew Bradbard

While there were some commodity standouts as discussed below, how about the Miami Heat All-stars….D.Wade, Chris Bosh and King James!

Crude oil has bounced 7% off their intra-week lows and as of this post is at the 20 day MA. We see support in August at $75.50 followed by $74.40. Look early next week for some bullish trade suggestions. Natural gas has declined 50 cents in the futures market this week but with prices within 30 cents of what we view as solid support we would use the current setbacks to establish bullish call spreads in October. We would not suggest buying futures again until an interim bottom is found.

Today’s settlement will be critical but as of this post prices are just above the 20 day MA; in the S&P 1072, the Dow 10075. We are looking for an additional 3-4% appreciation and then we will start to establish shorts with clients. Our favored vehicle will likely be short futures in Es and purchasing ES put spreads. If our prediction holds true a sale closer to 1100 and a ride to 950-975 by fall. Treasuries have lost ground for the last three sessions and we think the path of least resistance remains down as long as indices are moving higher. We think shorts could see a trade below 124′00 in September 30-year bonds.

Some clients were able to do some more lightening up in their October sugar; others just missed their limits. Sugar closed back under the 100 day MA losing 2.81%. On rallies into next week we would look to exit remaining longs for clients. At this juncture a sale near 17 cents and a buy closer to 15 cents makes sense. Being December cotton could not break 73.50 this week, we advised clients to exit all their bearish plays in cotton and look to re-establish shorts (futures & options) on rallies.

It is not out of the question to see cattle prices depreciate by 2-3%; as December live cattle ran into mild resistance at the 50% Fibonacci retracement level near 94.50. We still suggest buying setbacks.

August gold closed the week strong but was unable to overtake the 50 day MA at $1217. We would need to see a settlement above that level to re-commit clients to longs. For the last two sessions September silver has made higher highs and higher lows BUT we would like to see a settlement above the previous support line which now has becomes the resistance line; at $18.25. With copper above $3.06 we expect a probe to $3.20-3.25.

We have upped our buy limit in December corn; we would be comfortable buying clients closer to $3.80 rather than $3.65. Additionally we’ve increased our target from $4.20 to $4.45 Continue to use setbacks in agriculture as buying opportunities. Today’s USDA supply/demand report delivered NO surprises.

The Loonie was higher by 1.10% as of this post and 3.55% on the week …continue to buy weakness. Our objectives have been obtained but .9800 could still be seen next week. Recognize the easy money has been made on longs. The Swissie started to roll over today…maybe too early to tell. Clients are short expecting a trade to .9200.

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