Today in Commodities: Time to Make a Decision

by: Matthew Bradbard

The direction the markets move this week will likely determine where prices go the next several months. We suggest booking profits on longs in crude thinking we could get a set back. We would rather be on the sidelines wanting in the market than in the market wishing clients were on the sidelines. Prices are getting over bought and have failed to make it to higher ground in recent sessions. We’re expecting natural gas to break above the down sloping trend line that has capped rallies since mid-June. Continue to buy October and November 50 cent call spreads.

The S&P penetrated the 200 day MA today for the first time since mid-June but before you get too bullish we feel this move is in its eighth inning. We see resistance at 1111 followed by 1134 in the September S&P futures. Clients will continue to scale into shorts that hold those resistance levels. Additionally on a trade higher clients will liquidate their August 1150 calls and buy back their September 1000 puts. This should leave them with a realized profit on those two legs and long a September 1075 put holding for the next leg down. Sugar managed another positive day today gaining nearly 2%. We expect a correction to the magnitude of 10% any day now.

December cotton pushed thru the 100 day MA having gained nearly 5% in the last four sessions. Clients will be looking to short futures from higher levels and to establish bearish option strategies…stay tuned. Both 30-yr bonds and 10-yr notes violated their 20 day MAs but managed a close just above that level. We are looking to sell weakness via NOB spreads for clients but have not made a move just yet. Live cattle were lower by nearly 1% today. Clients will be looking to exit their August puts on a move closer to 91 in the coming days. They will remain long their December thinking this retracement is temporary. Based on the recent action if the pattern holds expect October lean hogs to grind lower to 74 cents this week. In late dealings gold appears to be breaking the 100 day MA. We could see sellers try to take prices back to the 20 day MA; in August at $1147. Clients have NO exposure in either direction. September silver was positive closing above the 100 day MA but the real test this week is if we can get above the 50 day MA; a level that has capped all rallies in the last three weeks. We suggest remaining long September futures as long as $17.70 holds and have most clients long via options in December expecting higher ground. Copper made its sixth consecutive positive session trading above the 100 day MA for the first time in nearly three months. This should not be ignored and if this level holds we may need to re-evaluate some of our other positions. December corn was down again today closing below the 100 day MA for the first time in three weeks. We see support between $3.68-3.75 and will likely start getting clients long again this week. Additionally a move slightly lower would allow clients to lift their shorts in September unscathed. Soybeans and soy meal were also lower but clients are looking for lower pricing before re-committing capital…see previous posts. The US dollar lost ground today dragging prices to fresh three month lows. Clients remain short the Euro and Swissie thinking that last week's resistance level will hold. Again our targets are $1.25 and .9200 respectively.

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