It does not take much in the way of volume to move markets in thin trade, so be careful. Wind was taken from the bulls sails in crude this week as prices traded down to seven month lows. August crude is finding buyers at $90/barrel but that level will need to hold or prices could see $85 in the coming weeks. Some clients are long from higher levels and I’m thinking we see $95 before $85. The distillates will need to bottom before we see any upside in crude as well. That did not happen today with RBOB lower by 1.50% and heating oil down 0.50%. The last two occasions in the last three months natural gas was at current pricing, and it was a buy. Past performance is not indicative of future results. Our suggestion is purchasing September bull call spreads. Sloppy sideways action as of this post indices are almost at the exact point we started the week. Next week we will see if the 200 day MA can hold ... if it does we may have some bullish trade recommendations.
The dollar is approaching its highs on the week but we don’t anticipate a trade north of 77.00 ... trade accordingly. The loonie failed at the 20 day MA closing, down nearly 1%, and we suggest cutting losses on any long futures. Lean hogs have lost 3% in the last three sessions but we expect a trade down to the 20 day MA another 2%. We would like to see a 3-5% dip in live cattle before re-establishing longs for clients.
Gold and silver gave up the ghost in the last two sessions with gold down over $50/ounce and silver giving back nearly $2/ounce. Some clients have light long exposure via options and are carrying a loss, but for now we choose to stay the course. Cocoa held the 20 day MA on today’s pullback and in our eyes is still a buy. Sugar remains a sell though clients who are short are carrying a loss; our target remains 23 cents/lb in October. On the week grains traded down but at these levels we feel longs should be scaled into with long exposure into next week’s USDA. That goes for corn, soybeans and wheat. Our clients hold bullish positions in soybean oil and wheat and likely will be gaining some new crop corn exposure next week.
Treasuries failed to breach the 20 day MA. If this carries into next week clients will likely cut loses on their September bearish plays in 30-year bonds. As for the short end of the curve prices have started to consolidate for what could be a leg lower ... 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.