Today In Commodities: Lack Of Stimulus

by: Matthew Bradbard

News from the Fed that they may provide less economic stimulus may be painful in the short run but it was music to my ears, as the market should determine prices, not an independent agency. The test will be if this is rhetoric or their real intentions.

Crude had an inside day, giving back about half of yesterday’s gains closing $1 lower. The 40 day MA is acting as resistance while the 100 day MA is support. I see a break lower and a breach of $101.80 in May should lead to a sub $100 trade. Though heating oil traded lower with Crude, RBOB advanced to a new contract high with May closing over $3.40. My concern is that if we see this rising tide lift all boats, Crude would have a tough time breaking lower if RBOB continues to advance; stay alert. Natural gas prices are basing out but do not get sucked in until we see upside, not just sideways action. May futures would need to appreciate 20 cents for a buy to be back on my radar.

Stocks remain at lofty levels but we did fail to make new highs and we did probe the 9 day MAs and test the 20 day MAs, so an interim top may be in the making. My take is that on a settlement below the 20 day MA, aggressive traders can scale into bearish trades. Those levels are 13080 in the Dow and 1395 in the S&P. A bearish engulfing candle in Treasuries with 30-yr bonds and 10-yr notes breaking down today. Trail stops down and take what the market will give you.

Gold fell nearly 2%, closing at a one week low and on the verge of breaking the $1640 level in June. See previous posts; a break of $1640 should be followed by $1575 in my opinion. Silver lost 1% today and if the 100 day MA is broken soon, at $32.25 in May, $30 here we come. My bias remains bearish in both PMs.

With sugar closing back under the 50 day MA, aggressive traders can get positioned short once again. They are likely getting in around the same levels they took their shorts trades off. Though I was hoping for a higher entry we may not get it, so scale in with futures with stops above the recent highs. Remains on the sidelines until we get 5-7% appreciation in coffee. I’m still thinking there is more downside before we need to be buying cattle so be patient.

Ag should see more upside as this appears just to be the market taking a breath as soybeans, corn and wheat have only advanced 70% of what this leg has to offer, in my opinion. What I’ve suggested for those carrying a large long position is selling out of the money calls or buying puts as a hedge to protect from a correction.

The dollar gained nearly 1%, trading up to its 50 day MA for the first time in two weeks. All crosses were off with and appear to be headed lower in the short run…trade accordingly. I have no open recs in forex and am glad, because I likely would have advised a trade on the other side today.

Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor’s needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.