Today in Commodities: Higher or Lower?

Includes: DBA, JJA, JO, NIB, SGG, SLV
by: Matthew Bradbard

Higher or lower? That is the question. While we think indices, energies and currencies could move higher in the short run, we feel a move lower is just around the corner.

Crude continues its assault higher as we see the 61.8% Fibonacci retracement as the next stop; at $83.75 in the September contract. Use the 100 day MA at $80.65 as support. Our speculative clients have no exposure as they missed this trade. Natural gas futures broke the 50 day MA today; futures traders likely were hit on their stops. We suggest fresh entries to be buyers of November 50 cent call spreads.

As of this post indices have been unable to follow through after yesterday’s bullish performance. As we’ve said, we are nonbelievers and advise aggressive traders to fade this rally as long as we do not see a settlement above 1135-1140. Clients are buying September and soon December ES puts thinking we will see a trade lower in the coming weeks.

After 8 sessions cocoa finally had a losing session. Aggressive traders could get short with tight stops. In two days October sugar has lost 5.15% and with today’s close dragging prices back below the 100 day MA and we expect more downside. Coffee likely put an interim top in this week as December is off by almost 5% from its highs yesterday; 15 cent put spreads in December would be our suggestion.

December gold closed back above the 100 day MA at $1188. On a close above that level tomorrow we will have some bullish plays. Continue trailing stops higher in September silver futures and if carrying a large position we would suggest starting to move positions into the December contract. Clients own and are advised to purchase December call spreads.

We continue to think prices in agriculture are ripe for a correction. We suggest being short with tight stops or moving to the sidelines and look to buy from lower levels. Clients cut losses on their KCBOT/CBOT wheat spreads today as the spreads are not working and CBOT continues to gain on KCBOT. This should not be the case, so we exited stage left at a small loss. Ideally we could get long at these levels with clients; December corn at $3.80, November soybeans at $9.50, December soy meal at $270 and December CBOT wheat at $6.15-6.25.

RBA left rates unchanged at 4.50% today. Nothing new to report in forex; until the dollar bottoms, international currencies will track higher without our clients.

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