Today In Commodities: Further Upside

by: Matthew Bradbard

A move higher in a straight line is unsustainable. A healthy correction makes for a stronger market so my take - the longer markets appreciate without a correction the less likely it is a real recovery ... thoughts?

May Crude will close negative on the day but well off its lows. Looking at the big picture a trend line was tested and held that has been in place since October 2011. My bias remains bearish but I would like to see a breach of $104 in May in the next few sessions. Heating oil was lower by 1.25% and RBOB 1.75%. I advised hedgers concerned with higher prices to lift hedges as I am predicting a further break. The idea is on a 10-15 cent deprecation re-evaluate and look to establish hedges form lower levels .... stay tuned. For the second day in a row natural gas traded above but settled below the 9 day MA. A close above that level into the weekend I would lightly wade back into bullish exposure. A stop just below the recent lows is a relatively low risk trade.

As stocks continue to grind higher I am advising those with sizable equity exposure to establish hedges to protect against a correction or at a minimum to lighten up. Gold futures bounced off the 61.8% Fibonacci level but not so quick as a bottom may not be in at least that is my take. Those who disagree put stops just below $1,639 in June. I would be on the sidelines for the next few sessions until the yellow metal gives a defined signal. Silver advanced 1.7% but is still below its 50 day MA. As long as $33.50 contains upside I remain bearish ... trade accordingly.

Sugar appreciated 4% ... see yesterday’s post. As prices approach 26 cents in May start probing shorts. View this as a scale in type of opportunity. Move to the sidelines on coffee shorts. Based on what I’m interpreting I see a trade up to $2/lb. around the bend. The sentiment remains bearish in Treasuries. Fade rallies in 10-year notes and 30-year bonds using the 20 day MA’s as your stop loss on a closing basis.

Given the opportunity if we see cattle prices approach their high this week be a seller. We missed some great grain bullish trades for clients but at this point the train has left the station. If we do get a profit taking led correction ahead of month end we remain committed to gain bullish exposure for clients but only on a break. As a trader recognize you will miss trades and this may be one of them. The dollar could retrace. I would shift to the sidelines temporally on other crosses.

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