Today in Commodities: Waiting Game

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 |  Includes: AGF, BAL, CAFE, CORN, GAZ, GLD, MOO, NIB, OIL, SGG, SLV, SOYB, UDN, UUP, WEET
by: Matthew Bradbard

Markets appear to be at a standstill until Washington comes out with some type of game plan with the debt ceiling. Inside day in Crude oil with prices unable to penetrate $100/barrel is a preliminary sign that prices are starting to get over stretched but we still maintain a $102/103 target at this time. We only bring this up because if prices were to roll over one should put stops above the recent highs. Another 10-15 cents lower in natural gas and we’d be willing to start exploring longs for aggressive clients…current prices in September are $4.35.

Stock indices could go either way as there will likely be an overreaction depending on a resolution out of Washington. The problem is which way will we move…we’d prefer to react as opposed to guess. Gold traded to fresh record highs but did pare their gains with futures closing $10 off their highs. We maintain that a 3-4% correction should happen. A settlement below $1580 in August should confirm an interim top is in…trade accordingly. At its highs September silver traded just over $41/ounce completing a 50% Fibonacci retracement. Aggressive clients are positioned short looking for a trade back near $38/ounce…these positions are currently carrying a loss.

The dollar treaded water today with the big mover being the Swissie trading to fresh record highs. Shorts should have been stopped out at a loss on the new high. Still on our radar is bearish exposure in the Loonie, our suggestion is maintain shorts as long as current resistance caps an additional advance. Sugar gives up nearly 2% today but we are not celebrating as clients in this trade are short from much lower levels. We would get some pleasure on a breach of the trend line which in October comes in just below 29 cents.

Cotton still appears to be basing out but we’ve yet to make a move on behalf of clients. We’ve mentioned trying to gain long exposure in December bull call spreads but to date no action has been taken…stay tuned. If and when 30-yr bonds and 10-yr notes close below their 20 day MA’s we have an interest in gaining short exposure for clients BUT not until that occurs. As a lower risk trade investors could gain bearish exposure in longer dated contracts with tight stops..our previous suggestions have been December 2012 contracts. We expect agriculture to be under pressure in the short term as aggressive traders could be short wheat, corn or soybeans. We see support in November soybeans at today’s low followed by $13.45 and then $13.32. Today’s trade suggestion was a futures calendar spread in corn short December 2011 and long December 2012 1:1. Our current suggestions in the livestock sector is bullish plays in live cattle.

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