With a bit of leverage and wild swings traders have been forced to manage their trades more than ever i.e. cutting losses and taking profits. The 100 day MA appears to be the pivot point in Crude oil; in the June contract that level is $100.55. We are cautiously optimistic and have bullish positions on with some clients thinking we can appreciate $3-5 more in the immediate future…trade accordingly. Natural gas picked up nearly 2% today… we have yet to establish longs but we likely wade long July futures tomorrow with stops below the recent lows with aggressive clients…stay tuned. Equities traded to their highest level in one week and appear poised for fresh highs… we will look to be a seller from higher levels in the S&P and NASDAQ with clients.
As for currencies we would be selling bounces in the Yen and Swissie; our targets are 1.2150 and 1.1100 in June futures. Continue to scale into long in lean hogs and live cattle with stops below the recent lows. We anticipate both pigs and cows to make their way back to the 20 day MA; in the June contracts those levels are 97.25 and 113.25 respectively. Gold and silver were higher for the third consecutive session as there is likely more upside on this leg. The next test in silver is if price action can lift prices back over the 50 day MA; in July at $39.05. We say yes and could see $41.50/ounce this week but we expect it to be two sided action. A trade above $1525 would likely lift gold back to $1550/ounce…trade accordingly. As a trade we would likely lighten up on longs if we saw that level in the next two sessions. Sugar was higher by nearly 4.5% nearly re-taking the 200 day MA. Some clients are long July and October expecting another 5% in the coming weeks.
Sugar remains on our buy list and coffee on our sell list. Food for thought we feel coffee could drop 25% in the next two quarters so we will be building bearish positions for the coming weeks with clients that are wiling to stay with a trade that long. Old crop wheat, old crop soybean meal, new crop corn and new crop soybeans are what were advising clients to buy. Tomorrow we will have the USDA supply/demand report so expect some fireworks overnight and on the open tomorrow. Finally our patience is paying off in bearish plays in the Treasury complex…via 10-yr note put options, short futures ad bearish plays in the Euro-dollar. If this week serves to be an interim top we would look to add to these positions for clients.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.