Today in Commodities: Back to Business

by: Matthew Bradbard

Now with the World Cup behind us traders can focus on the job at hand and get back to business. We expect Crude oil to track higher but the 20 day MA is serving as resistance and I noticed today looking at the daily chart if you draw a trend line down from the May highs it comes in at $76 in August. Support is seen at $74.40 followed by $73.40. If these support levels hold through tomorrow we should have some bullish suggestions. We would refrain from trying to pick a bottom in natural gas futures BUT we could be forming a triple bottom in August from the last three sessions. For our clients we’re suggesting October 50 cent call spreads; i.e. $4.75/5.25 should be approximately $1400/per.

As of this post indices are higher with the S&P trading just above the 20 day MA. If we close higher today will mark the fifth consecutive positive session. Upside resistance comes in at the 50 day at 1092 and then the previous resistance at 1120/1125. We will be looking to establish shorts for clients from higher levels. A trade higher was rejected in Treasuries with prices near their lows as of this post. Continue to sell rallies in 30-year bonds and 10-year notes.

October sugar gained just under 3% today closing back over 17 cents. On a push 2-4% higher, exit remaining longs as we do not see much more upside. We do expect cotton to trade lower though we would like to be a seller from higher levels for clients - ideally selling December over 77 cents anticipating a trade under 70 cents months down the road. Traders who do not mind trading illiquid markets could gain long exposure in lumber as long as the 20 day MA holds, looking for a trade to $240 in the coming weeks.

Inside day in August gold; we’ve advised clients to buy a trade above $1218 or sell a trade below $1174 but until then stand aside. As long as the 100 day MA supports September silver we would remain long silver. Clients are purchasing December call spreads expecting a trade to $19.50. If September copper fails to get above $3.06 in the next few sessions we would expect a pullback to $2.86-2.90.

We would use the current setback in live cattle to be a buyer as long as the 100 day MA supports; in December at 93 cents. In the immediate future we expect to see a lower trade in agriculture and would advise longs to tighten stops or move to the sidelines and look to re-establish longs from lower levels. Our favored play would be a purchase of December corn closer to $3.80.

The dollar has completed a 61.8% Fibonacci retracement and we think a bounce is in the future. As it stands now we would be a seller of rallies in the Pound, Euro or Swissie. Clients are positioned short the Swissie from a previous trade and some purchased September Euro puts today. Our targets are .9200 and 1.2300 respectively. Book profits on remaining longs in the Loonie and move to the sidelines.

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