Today in Commodities: Jobs Report Moves Markets

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 |  Includes: AGF, CORN, FXY, GAZ, GLD, MOO, NIB, OIL, SGG, SLV, SOYB, TRSY, UNG, WEET
by: Matthew Bradbard

A curve ball with non-farm payrolls today. Unemployment reaching a reported 9.2% and adding 20% of the anticipated jobs last month whipsaws markets. Crude gave back the previous two days gains, down 2.4% as of this post. We did not see this type of move to end the week but we still finished higher now for the second week running and though the wind was taken from bulls sails we are still friendly and anticipate higher ground. Energy traders may just need to deal with increased volatility when trading crude, the products and natural gas. Inside day in natural gas today with August gaining just over 2%. We like the increased volumes in recent sessions and view natural gas as a value play. As we’ve voiced in recent posts a 10-15% appreciation from current levels is our expectation in the coming weeks ... trade accordingly.

Stocks will finish near their highs on the week but from over bought levels and based on the lackluster jobs number do not rule out a trade back under 1300 in the S&P. Some clients own September bear put spreads. New entries could gain bearish exposure willing to cut losses on a settlement above May’s highs. The commodity currencies have had a nice bullish run but in my opinion it is time to book a profit and look for a potential reversal getting short next week ... stay tuned. On our radar as a potential buy is the yen but we’ve yet to make a play with clients.

Continue to buy dips that hold the 20 day MA in lean hogs. In the last four sessions August gold picked up nearly $60/ounce recouping almost all of the previous two weeks losses. We’re looking for more, thinking we could see a new record high in the coming weeks. That would mean roughly an additional 2.2% from current levels. Our suggested play is purchasing October bull call spreads. Silver in the same four day period advanced 8% and should be on its way in the September contract to $38-39/ounce. We suggest September and December call spreads. Cocoa has started to roll over as we hinted at in previous posts. We’ve worked out of most of our clients' longs. Ideally we get a bump early next week to be out of all remaining positions. Aggressive traders should use an advance in cocoa next week to get short. Sugar’s near 12% advance this week was painful for our clients bearish positions. Most remain short thinking this parabolic move will soon reverse but a trade over 30 cents/lb. in October we would likely leave the position with a sizable loss ... stay tuned.

Agriculture remains a buy and we think in the coming weeks all the recent losses will be erased ... that goes for wheat, corn and soybeans. Corn will likely be the leader on the upside but at some capacity we suggest gaining long exposure in this sector expecting the USDA report in August to be more accurate than the debacle in late June. Treasuries are back above their 20 day MAs ... what a roller coaster ride of late. If 30-year bonds and 10-year notes rally further but fail to make new highs we may look to get clients short again ... 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.