Today in Commodities: Rocky Road

 |  Includes: AGA, BAL, CAFE, GAZ, GLD, MOO, NIB, OIL, SLV
by: Matthew Bradbard

No not the ice cream but rather the current market. A bullish inventory report and lo and behold a fresh 2010 contract high in Crude. The triple top is negated as we should see $90 on this leg and potentially a re-visit of the spring highs near $93. What has been interesting of late is that the distillates have been outpacing oil on this move higher. When this pattern stops we could be close to a top so monitor their relationships. Bearish engulfing candle in the daily natural gas chart. We could re-visit the trend line that we broke out from earlier this week. If we do and it holds we would suggest staying with your longs and adding fresh entries. The 20 day MA at $4.13 will need to hold on a closing basis in the January contract. While we do not expect the indices to roll over on a trade down to the 20 day MA we will be advising clients to exit their ES put options; that level is 1190 in the S&P.

With the exception of lumber all the softs were hit hard. Cocoa and sugar were lower by 1%, cotton was down the daily limit and OJ and coffee were losers by just over 2%. We’ve yet to make a move on behalf of clients but have bearish plays in coffee and cotton on our radar…stay tuned. Lean hogs are back above the 20 day MA for the first time in two months. We’re suggesting long exposure anticipating 4-6% further appreciation. Live cattle is a buy, expect trade recommendations in February and April in the coming sessions. As we’ve voiced for several weeks we think live cattle will trade to a record high by year's end if not early 2011.

Corn held the 20 day MA today; clients will likely start scaling into longs in the coming sessions. We cannot rule out the gap from last month being filled but as we get closer to $5.35 in the March ’11 contract the more aggressive buyer we would become. The correction in metals continues but much like on the way up silver is far outpacing gold. Gold is roughly $20 off its highs while silver is just over $2 from its highs. On the standard contract that represents $2,000 in gold and $10,000 in silver. The downside may not be done as of yet but brave traders should be buying on dips. The Yen tested the 50 day MA on its lows today. On a new low we should see December trade back near 1.1800. Some clients remain short via put options looking for an exit door this week on a new low.

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