Today in Commodities: Two-Sided Trade

by: Matthew Bradbard

This week’s activity has been far from one sided as markets are fluctuating in both directions with no clear direction. Weakness in equities, a rising dollar, a slowdown in China or a production increase in Saudi Arabia take your pick but crude was down almost 2.7% today. We used today’s set back as a buying opportunity for some clients opting to buy September bull call spreads. We would prefer to see more signs of a bottom before committing to a position trade in futures with clients. Natural gas recouped some of the previous days loses picking up 1.8% today, closing at the 9 day MA $4.75 in July. We are anticipating a trade down to $4.40/4.45 in the coming weeks, trade accordingly.

After one day of gains losses resumed in equities which are near their lows as of this post. Momentum remains down as we will not try to pick a bottom as prices may challenge the 200 day MAs, with the Dow at 11575 and the S&P 1245. As forecast the dollar is trading up to the 20 day MA, the test next week will be if we can trade above that pivot point. We favor fading rallies in the euro, pound and swissie. The aussie and kiwi appear to be coming under pressure as well. Live cattle failed to hold onto gains and end the week where they started the week. If we hold last week's lows we will re-establish longs for clients ... stay tuned. Traders can continue to buy dips in lean hogs as we expect an additional 2-3% appreciation.

Gold could be making an interim top, much of that will depend on outside markets next week. We see solid support at the 40 day MA at $1517 but if that was to give way we could see $1475/1485 relativity shortly thereafter. Bearish engulfing candle in silver today with prices closing at the 20 day MA: in July at $36.20. We are looking for lower prices in the immediate future so get short or look for a long entry from lower levels. Buy with both hands if given the opportunity between $34/35 ounce. Cocoa is 5% off its lows this week but we think there could be an additional 5-10% appreciation ... trade accordingly. Corn prices are approaching record highs and though we do expect prices to remain elevated we are positioned to play set back with clients as we think prices have gotten ahead of themselves. We would play new crop as if we are wrong, traders should ration old crop prices. As for wheat we’re long with clients looking for a rebound and we are neutral in soybeans at the moment. We’re still looking for a trade lower in Treasuries but as opposed to fresh entries just as a window to exit existing shorts likely at a loss ... stay tuned.

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