Today in Commodities: Watching Paint Dry

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Includes: AGF, GAZ, MOO, OIL, UDN, UUP
by: Matthew Bradbard

January Crude closes virtually unchanged on the day but as we’ve hinted in recent blogs we think there is more work to be done on the downside. The “whippiness” continues in Natural Gas with prices down 3.7% today. We’ve gone from bullish to bearish back to bullish and prefer the sidelines for clients in this indecisive environment. Though we’ve yet to get a clear signal, some of our more aggressive clients opted to get short the S&P today. We are not advising futures at this juncture, but our suggestion would be purchasing 75-100 point March ES put spreads. This may be premature, but if prices were to start rolling over, we think a quick 4-6% move lower could be captured.

The 20 day MA continues to be the pivot point in the US dollar; in December that level is 79.70. We continue to suggest buying dips in the Euro, Pound and Swissie. Inside day in both Gold and Silver. For the first time in several months, we think the path of least resistance is lower in both precious metals. In February Gold our target remains $1330, and in March Silver $27.

The USDA grain stocks report comes out tomorrow before the market open. Here are the average estimates in millions of bushels from one of our more informed floor traders: Corn 803, Wheat 849, and Soybeans 167. We advised most of our clients to lighten up in their profitable Corn positions. We remain bullish, but don’t like carrying trades into potentially market moving reports. The only real excitement in the softs sector was Lumber moving up limit, or 3.85% today. Nearly a 10% appreciation in the last three sessions. We feel there is more upside, but suggest waiting for a retracement if you are not already long.

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