Markets do not need to trend higher or lower to trade if you trade both from the long and short side. Inside day in Crude oil as prices should close down approximately 1.50%. As we said yesterday prices could go either way; a trade below $96 would likely signal lower ground and a trade above the 100 day MA at $101.65 would likely signal higher trade. Natural gas is lower by nearly 5% in the last three sessions …clients are down on their longs but will stay the course as we do not expect much more downside. Until we get a settlement above the 20 day MA or below the 50 day MA in the indices we would recommend the sidelines. Those levels in the June S&P futures are 1342 and 1320.
Lower low and lower high in the dollar index today as prices appear to be rolling over…our target is 74.00 on this leg. The play would be in our opinion to be long the Euro or Pound. Live cattle traded to a fresh 2011 low…not exactly a bull market. But we feel the 12% slide in recent weeks is far too exaggerated. Clients have started to bet long August and December via futures and options and are currently under water on their trades. Gold remains in no mans land as prices could go either way. The fact that we could not muster a rally with dollar weakness is not a bullish signal. Silver closed above the 100 day MA again today…we have advised light bullish exposure with clients via September bull call spreads in recent sessions. With dollar weakness it appears cocoa is forming a sold base so we advised clients to start gaining long exposure today. Our suggestion was to purchase out of the money calls or to get long futures and sell at the money calls, both trades were done in September contracts. Sugar was hit today…on a further sell off we would be looking to re-establish longs in October contracts for clients that exited July yesterday. Coffee has lost nearly 15% i the last two weeks as chart damage has been done, do not rule out a trade to the 200 day MA, another 12% lower. Take profits on all longs in agriculture and look to get back in at lower levels. This mainly pertains to traders in new crop corn and soybeans that are carrying profits. Major price swings generally happen at a market turn…is that what happened in Treasuries today…time will tell. Some clients are positioned short 10-yr notes, 30-yr bonds and Euro-dollars.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.