Today In Commodities: Is The System Flawed?

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 |  Includes: BAL, CORN, COW, CRUD, DBA, GLD, GRU, MOO, SLV, UNG, USO
by: Matthew Bradbard

The longer this despicable situation goes unresolved with MF Global the larger effect we see on the commodities market and overall financial system. We hope to see a resolution in the coming weeks.

Crude is roughly $5 off its highs and we are operating under the influence that an interim high was reached this week. We are advising clients to be selling rallies and see Crude closer to $90 than $100 in the coming weeks. That being said, we would expect the distillates to continue moving south in the short run as well. A potential triple bottom is in the making in natural gas but we are reaching trying to find a bottom. Wait for evidence or, if picking a bottom, have tight stops. We expect to end the week lower, near the bottom of the recent trading range for the last four weeks. We remain mildly bearish expecting lower ground, however clients have moved to the sidelines as clients had options that were decaying due to the sideways trade.

Gold held the 50 day MA for the second day in a row. Gold will close the week lower by approximately $65/ounce . We expect an additional $50-80 decline in the weeks to come; trade accordingly. The 40 day MA that had previously served as support should now act as resistance; in December at $32.50. Silver has lost roughly $3/ounce; we expect $2-3 more in the coming weeks. Mixed bag in currencies as the dollar is approaching overbought levels. We suggest moving to the sidelines on any futures positions.

Cotton lost 7% in the last two days dragging prices to four month lows. We missed a short entry and will be looking to establish bearish trades next week on a bounce; trade accordingly. The sentiment remains bearish in grains -- in corn, wheat and soybeans. Note the head and shoulders formation in corn that on a breach of the neckline could indicate a major break; trade accordingly.

Live cattle broke 1.65% today dragging prices to three week lows. Another 1.5-2.5% and clients will be looking to re-establish bullish trades. This would also fill the gap in the chart in February from late September. Lean hogs have gained six out of the last seven sessions lifting prices to three week highs. We would remain long thinking we get a probe to the contract highs in the coming weeks.

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