Today in Commodities: What Does Dollar Down Equal

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 |  Includes: AGF, CORN, GAZ, GLD, MOO, OIL, SLV, SOYB, UDN, UUP
by: Matthew Bradbard

Is a 4.5% rally in the dollar index all we get…we think so? Look at the charts, the last three times July Crude futures have tried to violate the $96 level selling has been rejected…should we read into this? With prices approaching over sold levels we have longs on our radar but my suggestion would be wait to see if we can find an interim bottom. Food for thought a 50% Fibonacci retracement is $95.25 and a 61.8% retracement drags July to $90.80…stay tuned. The 100 day MA capped movement in natural gas yesterday and today. At these levels we still like buying with stops below the recent lows or purchasing August bull call spreads. The S&P traded down to the 50 day MA at 1319 before finding support while the Dow got within 50 points before losses were pared. Our suggestion would be to cover any remaining shorts and move to the sidelines. Our clients were out of their shorts a few sessions ago at a minimal profit.

The dollar indeed appears to be forming an interim top and on a trade under 75.00 in the coming sessions we would execute shorts here or longs in corresponding crosses, i.e. the European currencies would be our favored plays. Live cattle closed marginally lower today but almost 1% off their lows. If this is not just a one day fluke we think cattle should be bought if we see follow through. This would likely mean a trade back near 111.00 in the August contract. June gold traded below the trend line but heel on as of the close…the next few days will be critical. We would expect the 50 day MA at $1467 to act as stiff support as it has for several months. On a settlement below that level we feel it could be a game changer. For now we remain neutral on gold. Silver is down 1% as of this post …about smack dab in the middle of a $1.50 trading range. We like gaining long exposure at these levels as prices have come off a tumultuous 32% in the last three weeks. WARNING…only for extremely risk tolerant investors. In late dealings sugar was able to muster a rally and close positive nearly 4% off its lows. Were suggesting long exposure and may be willing to add to clients existing longs on a trade above the 20 day MA; in July at 22.06. A nice move higher in Ag today as new crop corn and new crop soybeans have got the bulls back in the driver’s seat. December corn is 6% off its lows last week while November soybeans are trying to gain some traction. We anticipate a trade back near $7/bushel and $14/bushel respectively. At the moment any bearish plays in Treasuries are losing clients money and we’ve told clients to look for an exit door to cut losses on the next correction lower.

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