Today in Commodities: Mr. Market Dislikes Changes

by: Matthew Bradbard

Reform is rejected as “Mr. Market” does not like the coming changes. Oil’s performance today was similar to yesterday's, with a large trading range; prices closed virtually unchanged, remaining above the 50 day MA. Continue to use the 50 day MA as your pivot point; in August at $76.25. We expect oil to trade between $75.50 and $79 in the next week and would be willing to trade that range for aggressive clients. Natural gas exploded to the upside today, gaining nearly 7% with prices currently above the 100 day MA. Clients are advised to buy October 50 cent call spreads.

The S&P is running into stiff resistance at the 200 day MA, and 1100 could prove to be a tough hurdle to overcome in the September futures. Aggressive traders could start scaling into longs, as we said in our commentary Monday. Most of our clients put on ES positions yesterday. They bought August 1150 calls and September 1075/1000 put spreads. See yesterday’s post. Stand aside in Treasuries and look to be a seller from higher levels.

October sugar was higher by 2.47%, trading to a new 2 1/2 month high. Clients worked out of more of their October calls. They are nearly out of all their October sugar calls but as we’ve suggested, 18 cents may be a stretch on this leg. December live cattle have reached our objective; traders with sizable positions are advised to lighten up. Clients have placed gtc profit orders on their call options.

It was an inside day in gold; clients have no exposure. At this point we feel we could see a $30 move in either direction. Silver has yet to make up its mind if prices can push higher. In the last two sessions we’ve traded above the 20 day and 50 day MAs but failed to close above those levels. Most clients have bullish exposure via September futures or December options.

Big buying overnight from China in the Ag sector, and weather concerns helped propel prices higher in corn, wheat and soybeans. Continue to buy dips across the board as a grain bull market appears to be rearing its head once again. Off their lows on the USDA report, two weeks' corn has appreciated 18%, CBOT wheat 31% and soybeans 10%.

Clients short the Euro via put options got run over today. We will stay in the trade today but recognize that premiums lost 50%. We managed the trade in the Swissie by buying back the September 93 cent puts at a profit of approximately $1100/per. We also initiated a position in August calls paying $850 for 97 cent calls. Clients remain short futures carrying a loss of about 2 cents; $2500/per. We expect prices to roll over but we were early on the trade… obviously. We do not expect the dollar bleeding to continue - well at least not at this pace; prices are down 2.4% in the last three sessions.

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