No curve balls from the USDA but as for food prices look for prices to stay elevated. Crude will settle approximately 1% higher in today’s session trading briefly over $102/barrel in the July contract. We maintain our short term target in this contract at $104.50/105.00. It again appears to be the story that strength in the distillates are helping lift Crude prices as RBOB picked up over 2% today and heating oil 1.50%. Natural gas made a new contract high and failed closing down over 3% today. There is a reason why this market is called the “widow maker” as today's near 50 cent range amounts to $4,700 move per futures contract. We nearly hit out target over night…remember we’ve been calling for a trade back to $4.40 and should get it next week.
After six down days equities finally find some buying forming a bullish engulfing candle on the daily chart. We expect a bounce to the 50 day MA’s; in the S&P 1325 and that level in the Dow is 12410. The dollar made a higher low and higher high today as we expect this leg to lift prices back near and potentially above the 20 day MA; in June just above 75.00. Our recommended currency exposure is long the Loonie and short the Swissie with targets of 1.04 and 1.1650 respectively in June futures. For new entries trade the September contracts. Lean hogs continue to appreciate…buy dips, a 50.0% Fibonacci retracement carries July to 95.40. Live cattle penetrated the 20 day MA but backed off in late dealings. We suggest bullish exposure (pun intended). We anticipate another 5% on this leg in the coming weeks. Gold continues to dance around the 9 day MA. We feel prices could go either way so being we don’t have a feel keep your size small. Silver closed above the 9 day MA so in theory we should move higher from here and attempt a probe at the 40 day MA at $39.25. It could be volatile and come right back to current pricing so be cautious. Clients that had bearish July contracts were advised to position themselves in September bullish plays to hedge their July just for the next few days until silver makes a decision on direction. The idea is if we come lower temporarily book the profit in July and hold onto September for a rebound. Yes folks we trade for a living so we may take both sides of the market and in some instances at the same time. Cocoa traded up to the 200 day MA but gave back some of its gains. Prices still closed higher by nearly 2% as we like having long exposure in September with clients. Again we throw out that sugar looks pricey but we would like to see signs of a top before committing client capital…stay tuned. Let coffee rally another 4-6% and then look to sell into that strength...we will likely be buying bear put spreads in September or December for interested parties. A bullish USDA report for corn spilled over to the entire grain complex not to mention the floods in the Mid-West and insatiable global demand. Yes the Ag sector has my attention but I still maintain that we trade lower before we make new contract highs. This is the minority view but that is what makes market. The wheat/corn spread was a double whammy today as clients got hit on both sides. This may require deeper pockets than I initially thought but for now we’re staying with the trade. We would like to be out of clients' corn shorts and be long by month’s end. If this rally continues in equities will Treasuries ever find a top and at least retrace. We’re talking out position but a 2-3 basis point move lower is not out of the question. This should get most of clients' premium back and brave fresh entries a good risk/reward trade idea.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.