Today in Commodities: Whipsawed

by: Matthew Bradbard

Crude has worked back above the 20 day MA, gaining 1.75% as of this post. I think prices would have traded lower today if it were not for outside market influence, i.e. the dollar and stock market. Only our hedgers have exposure as we feel speculating on Crude in the current market is a crap shoot; prices could go in either direction. Natural gas is back at the bottom of the recent trading range, closing out the week down 3.3%. As long as prices do not breach the $4 level on a closing basis we suggest remaining long in November and December contracts.

A 2-3% move in the indices today was impressive but all that was accomplished is that prices are back at where they started the beginning of the week. We suggested clients to tighten stops on futures, as a close above these levels likely means higher ground. As for our clients' put options, we will hold onto their November positions. Treasuries rolled over, likely reaching an interim top mid week. We will be looking for some bearish plays next week for clients… stay tuned.

Clients were advised to cut losses on their shorts in sugar futures on the break out today. We will hold onto the March 2011 puts for now. Lumber had a limit move four out of five sessions this week and this market is not the most liquid, so be cautious. We’ve advised clients to step to the sidelines. As long as live cattle hold the trend line we like having bullish exposure with clients. We’re operating under the influence that the gap from Monday will be filled 3 cents above current levels

Gold has reached $1300/ounce; now where from here? We’re still anticipating a correction. Silver is convincingly above $21/ounce. Are we bearish? NO, but this pace in my opinion is unsustainable. The long metals trade is getting way too crowded… I’m just saying. So much for a correction in Ag with corn up 4.5% today, wheat higher by 2.75-3% and soybeans gaining nearly 3%. Clients hold small shorts in corn and soy meal and were looking good till today; they may be forced to cut losses next week… stay tuned.

Dollar down equals other currencies up; it’s that simple. Perhaps premature but we’ve started to scale into December puts in the Loonie smelling a commodity correction.

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