Today in Commodities: All Eyes on China

by: Matthew Bradbard

Markets remain in a holding pattern awaiting an adjustment in rates in China over the weekend. While Crude only looks to close down $2 on the week, we did close lower all five sessions. Our downside objective is $85 in the January contract. Natural gas could go either way … in a perfect world we'd get a 5% break so that we could buy from lower levels.

Our clients' only exposure is a futures spread; long February and short April. As it stands right now, indices continue to tread water near their highs, and though it may be premature, some of our more aggressive clients have started purchasing March 75-100 bear put spreads in the ES.

Continue to monitor the 20-day MA in the dollar as it remains the pivot point. We still like the idea of purchasing dips in the euro, Swissie and pound as we expect the dollar to trade back to 78.75 next week. If lean hogs and live cattle trade 2-3% lower next week, longs will be back on our radar. Gold traded slightly lower today but will close well off its lows as the 20-day MA has supported the last three sessions. Our target remains $1,330 in the February contract. March silver is $2 off its recent highs, but we think we could see $1.50-2.00 more.

No surprises in today’s USDA report. Continue to buy dips in corn but if the trend line breaks, be quick to move to the sidelines. That support level comes in between $5.50/5.55 in the March contract. Aggressive traders can start initiating shorts in March CBOT wheat. Cocoa closed just over 4% lower today. On a breach of the 50-day MA at 2850, expect 2750. A late rally in sugar allowed it to gain 1.5% today. We’re still looking for a trade near 30 cents in March to offset clients' March call options.

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