Today in Commodities: Wake-Up Call

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 |  Includes: BAL, COW, DBA, DBC, FXC, FXF, GLD, JJA, MOO, SLV, TLO, UNG, USO
by: Matthew Bradbard

Wake up and smell the coffee, gasoline, OJ or even beef…get commodities in your portfolio.

As of this post Crude is within 50 cents of where we started the week, but what that does not tell is the weekly range is nearly $12 or $12,000/per contract. Those who survived this week’s swings, congratulations. An environment like this is case and point why options should be used, perhaps even mini-futures, and your position size should be smaller than normal. We maintain our bullishness thinking we’re closer to $92/94 in the coming weeks. Natural gas finished higher three out of five days this week and we feel we’ve turned a corner headed north from here. We’re suggesting bullish exposure in October with a target of $4.45/4.55.

We anticipate a relief rally in the indices with prices already 10% off their intra-week lows. From here we see 11700/11800 in the Dow and 1240′ish in the S&P. If give the opportunity we will be fading that type of move with clients. We advised clients to take a very minimal profit on their 30-yr bonds…I just did not like the action.

Gold finished just off record highs but the bullishness appears to be waning. Prices closed lower two sessions in a row which had not happened in six weeks, until today. We’re looking for a $75-100 break from today’s close. Silver danced the trend line that has held for the last twelve months. On a breach of $37 we think it would be feasible to see a trade down to $34/ounce. We’re not calling for it but at this point we like the side lines with clients looking for a lower long entry…stay tuned.

The Swissie has collapsed almost 10% after hitting record highs mid-week. We played shorts with clients and on a decent rally we may play it again next week from the short side. We suggest options, as a hiccup could be way too costly. At the current oversold levels we also like scaling into longs in the Loonie, expecting a trade back to the 20 day MA; in September near 1.0370.

March cotton traded up limit today. If not long yet, we suggest gaining bullish exposure with a target or $1.15. Additionally in the softs sector we’ve revised our stance on OJ. We advised clients to get long November today with a target of $1.70/1.75. OK…in grains here’s the trade…we’re suggesting bullish exposure in December soybean oil. It allows some time and should be influenced by what we view as higher Crude oil and soybean prices. There is no formula for correlation but they appear correlated to me…trade accordingly. On a pullback closer to the 20 day MA’s we will be a likely buyer of live cattle with clients; in October at 117.10 and in December at 119.95.

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