Yes you read it right look for a bounce in the US dollar and a temporary set back in most commodities. Crude closes slightly lower for the first time in four sessions. The trend remains up but after the price explosion in recent sessions understand that in three weeks prices have moved from oversold to overbought. $79.15 the 38.2% Fibonacci retracement level should support any setbacks. Our upside objective remains $83.50 in the November contract. With prices above their early August highs both RBOB and heating oil should see continued upside. We would not get too greedy though on longs as the easy money has already been made. On this leg we’re anticipating an additional 7-10 cents. The bleeding continues in natural gas as prices lost nearly 2% today dragging prices to fresh 10′ lows. If prices do not turn from here we will be advising clients to cut losses on remaining positions. We have been trying to pick a bottom in November and December contracts for most clients for several weeks and hindsight being what it is catching this falling knife has once again been a losing proposition.
Stocks lower as of this post giving up roughly 1% today. We’re looking for confirmation of an interim top which we feel would come on a settlement below the 20 day MA’s; in the S&P at 1123 and in the Dow at 10585. As we’ve been preaching of late we feel the softs sector is a sell; today cocoa was down 1.7% (some clients got short March 11′ today), sugar lost 1.58%, OJ down by 0.64%, coffee 4.75% and lumber gave up 1.86%. We should have some more bearish suggestions in the coming days.
Treasuries are too high but likely headed for higher ground; we will be looking to be a seller for clients from higher levels in either 30-yr bonds or 10-yr notes. Live cattle broke the trend line that has held since early June, our interpretation short term we should see more downside. Traders in December call spreads will be advised to buy back their top leg in the coming sessions. The trade continues lower in lean hogs as we expect December to find its way to 72/73 cents. We’re thinking still any day now to see gold trade $50-80 lower and silver $1-1.50 lower. We’re out of ALL silver longs as of today and have continue to nibble at gold shorts with our more aggressive clients purchasing the December $1275/1225 put spreads expecting $1235 in the next 30-45 days. Clients were advised to exit their December puts in soy meal today and to continue lightening up on any corn shorts. We will be gaining some type of bullish exposure with clients in soybeans and corn before Friday’s USDA report. As it stands now those that have started to buy corn here is the trade; Long July 11′ futures, sell an out of the money call in July 11′ and purchase a December 10′ put. Using three legs allows flexibility if corn works higher or lower. Contact us for further clarification. Exit remaining longs in the Yen. A dead cat bounce in the dollar from these levels is our call; trade objective 80/81 in the December contract. Our play in this sector is shorts in the Loonie with a target of .9550. Look for fireworks tomorrow as the RBA and BoJ meet early in the AM on interest rates.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.