Today In Commodities: MF Global Hangover

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 |  Includes: CORN, COW, CU, DBA, ERO, FXY, GLD, JJC, MOO, OIL, SLV, UNG
by: Matthew Bradbard

11-11-11 - Is this a lucky day? More so than luck, how about some justice? I’ll feel a lot better when steps are taken to make MF Global clients whole and the sanctity of the commodities industry is repaired. Regulators and exchanges do not get it!

Crude oil will end the week roughly $5 from where we started the week as prices are approaching $100/barrel. Prices appear to be headed higher and most clients are out of their short and licking their wounds. Do we think higher prices are justified? NO, but we will likely see a test of $101; trade accordingly. Natural gas is approaching levels not seen in 14 months as prices could get close to $3.25 in the coming weeks. We would recommend waiting for a bottom as opposed to catching this falling knife.

Volatility persists in the stock market as 2-3% daily swings are a daily occurrence. A break below 1215 in the S&P signals lower ground while a trade above 1275 should be followed by higher trade. I wish we could be more help, sorry. We have some clients mildly bearish in ES puts but will cut losses on higher trade.

As of this post both gold and silver are higher by 1.6%. On the week after all the back and forth gold will finish up 1%. A break below $1740 which we favor takes prices under $1700, while a trade above $1800 could challenge the record highs. I do not have a feel and recommend the sidelines. Silver again is unable to take out the 50 day MA and remains range bound. Still feels like Vegas to me ... just saying. Copper was higher today for the first time in six sessions. We expect this to be short lived; trade accordingly.

If the dollar continues south into to next week all crosses with the exception of the Yen can be bought. After the major break in the Yen we have retrace 61.8% . Those with option spreads were advised to buy back their top legs. If we are correct we should see prices roll over and move back towards the lows and clients can make money on both legs; stay tuned. Continue to let cocoa work lower but next week we should have some bullish trade suggestions…stay tuned. The short ends of the yield is back in play. Our suggestion is bearish trade in 2013 Euro-dollars. Contact us for specifics but risk/reward this may be the best trade going for those traders who can exercise patience.

Agriculture remains a sale with corn the best prospect in my opinion. I feel bears have 25 cents of risk on March corn and 50-75 cents of profit potential. Live cattle is down for the last six sessions and appears still to be headed lower. Aggressive traders can be short with stops above the 20 day MA. Hog traders should have bullish exposure as we think an interim low was established this week -- trade accordingly.

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