Today in Commodities: Roller Coaster Ride

by: Matthew Bradbard

Keep your position size small as long as the volatility persists ... no need to be a hero. For a lot of noise crude really did not move this week. The story was more volatility than an appreciation or depreciation in pricing. We still say a trade blow $96 or above $101.70; the 100 day MA should signal the direction ... trade accordingly. A bullish engulfing candle in natural gas today as prices gained nearly 4%. We’re suggesting bullish exposure with a target of $4.50 in July and $4.60 in August. The 50 day MA capped further advances in the indices this week as prices lost ground today to end the week slightly lower. This makes it three losing weeks in a row for securities. The dollar managed to trade positive today but until we see new highs we maintain that we should trade south from here. Continue to buy dips in the European currencies, i.e. euro, pound or swissie.

Today clients were advised to gain long exposure in the Cable ... they were buyers of July call options. With live cattle at a five month high we like the value but it has been painful to catch this falling knife. Keep your position small until we see cattle prices start to turn higher. Gold was able to break out of its recent range today, gaining 1.4%. If we see follow through early next week we would be convinced to gain long exposure expecting new highs ... stay tuned. Silver continues to dance on the 100 day MA. We suggest scaling into longs with stops below the recent trend line or purchasing bull call spreads. We may have been a few days early buying cocoa for clients as prices got hit 2.6% today. We like buying September contracts via futures and options as we expect prices to rebound in the coming weeks. Our target is 7-10% from current pricing. We will likely be purchasing October sugar for clients next week as we think a run to 25 cent/lb. could happen in the coming months. Coffee gave up another 1.73% today as prices are approaching a two month low. If we bust $2.55 we see the next support near $2.45 in July. We remain bullish agriculture but have a buy break mentality in corn and soybeans, so be patient. A 25-35 cent break in corn and 45-60 cent break in soybeans should be bought, in our opinion. Some clients remain short the Treasury complex currently carrying a loss. As it stands now we have bearish exposure via options in 10-year notes and 30-year bonds and short futures exposure in euro dollars.