Clearly the Fed has no clue and if this is a market with NO inflation I’d hate to see a commodity market with inflation.
Crude fights back in late dealings to close marginally positive in today’s session. My opinion is this price action was position squaring and light buying ahead of Bernanke’s speech today, and OPEC is on the docket tomorrow. Furthermore the strength in the distillates could have aided in crude’s action as well. We will likely be looking for long exposure in crude in the coming sessions and have advised hedgers to have some exposure on their fall contracts. Inside day in natural gas as we are still looking for a price reduction in the coming weeks. We’ve advised bearish plays expecting a 5-8% break. Stocks fail to hold onto their gains and will settle near their lows as this correction does not appear to be done. Though we feel there is more risk to a price reversal and we see limited downside ... trade accordingly.
The dollar posted a four week low but being were oversold we do not see much more downside and instead see a sideways consolidation around these levels. The pound, swissie and euro remain in bull mode but we would trail stops or lighten up as we’ve seen a sizable acceleration of late. Aggressive clients were advised to scale back into longs in the loonie; our suggested plays are purchasing call options or getting long futures and selling out of the money calls 1:1. Live cattle were higher by 1% while lean hogs positive by 2% in today’s session. We have advised bullish plays in both meats thinking we can see both hogs and cattle appreciate from current levels. To take it a step further live cattle should be bought with both hands for those capitalized investors willing to stay with the trade for several months as just a 50% Fibonacci retracement would be approximately $4,000 per futures contract.
Flip a coin in gold ... we cannot get a pulse and feel better on the sidelines with a slightly bearish bias. We continue to trade both sides of the silver market with prices sideways again today. A settlement above the 9 day MA at $37.25 or below the 20 day MA at $36.15 should signal the direction of the next leg. Sugar broke out to higher levels today ... shorts should have cut losses. We see a triple bottom in cocoa around 2850 and think we could get a bounce from here. We’re suggesting bullish plays in September via futures and options. Cotton was down the daily limit again today ... fade rallies. Once we exit out clients out of cocoa we should have some bearish plays likely after Thursday’s USDA ... stay tuned. Corn and soybeans pared yesterday’s losses but we still think further price reduction is coming ... trade accordingly. Wheat cost just over 1% so clients' wheat/corn spreads were hit from both sides today. Stay the course for now but this trade could get ugly as we’re down approximately $1,250 per. Bernanke’s ramblings help add a bid to the Treasury complex today ... on new highs cut losses as fighting the Fed will cost our clients money. I just thought these morons were smarter than that. In my opinion this is a bubble but the timing of when it will burst and from what level is beyond me.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.