Commodity investors need to use risk capital and should have some sort of income but in this environment why the 9-5 job hone in your skills and become a commodity trader. My opinion is we have elevated prices for years and enough movement to see appreciable gains. Remember, risk capital only!
As of this post Crude oil is off by 2.5% back near where we started the week. At its lows October completed a 38.2% Fibonacci retracement. We feel the two biggest immediate influences are the weather and action in the dollar. It appears we may get a slight appreciation in the greenback and on that and lack of activity in the Gulf we think we could see prices back off 20% further. Natural gas got walloped today down nearly 5% back under $4 once again. We hold long positions for some clients and are advising fresh entries to be established to those who previously did not have exposure. We still are looking for a move higher and have advised bullish exposure in November contracts.
The lack of job development and overall uncertainty spilled over into heavy selling in equities today with the indices down 2.5-4%. Indices closed on the 20 day MA but on a breach into next week expect another leg down; we anticipate at least another 2-3% deprecation into next week. Thirty-yr bonds are at new contracts highs appreciating over 2% today while 10-yr notes are approaching their highs. Call me crazy but we put a small bearish options trade on for aggressive clients in December 30-yr bonds near their highs today. If we continue north they will likely cut loses next week ... stay tuned.
Gold end at the highs for the week, appreciating 3% today and back within $35/ounce of its record highs. The chart looks good but we remain on the sidelines looking for a lower entry than current pricing; unfortunately we missed what looks to be a great entry back near $1700/ounce. Silver pushed higher as well gaining 4.3% today, closing over $43/ounce. A trade over $44.30 likely means a re-visit of $48/ounce but were looking for a lower entry for clients here as well ... stay tuned.
Aggressive traders can continue to scale into longs in the Swissie but do not bet heavy until we close over the 20 day MA; in September at 1.2775. The Yen continues to consolidate around the 20 day MA; in September at 1.3020. Some clients have light exposure short thinking the BOJ could intervene.
The 20 day MA supported sugar again today but on a breach of that level we would expect a penetration of the trend line that has held since mid-May. We’re advising bearish plays in March sugar thinking prices could falter 5-8% in the coming weeks. OJ remains on our buy list and coffee on our sell list. Coffee closed lower for the first time in nearly three weeks, albeit only marginally. Those trading coffee are suggested to have an exit strategy to manage loses on a further appreciation because this market has clearly been one sided and we’re bucking the trend.
Most of yesterday’s grain losses were erased today with corn higher by 2.9%, soybeans higher by just under 1% and wheat nearly 2%. We favor short exposure in corn at these elevated prices, thinking too low of a yield is priced into the market and seasonal tendencies. Past performance is not indicative of future results. Live cattle and lean hogs are a buy at these levels. We did not act yet in the hogs but some clients started buying December live cattle today. Our favored play for both is long futures and selling call options at a ratio of 1:1.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results