Today In Commodities: Broken Record

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Includes: CAFE, CHOC, CORN, DBA, GAZ, GLD, IAU, JJC, MOO, OIL, SLV, SOYB, SPY, UDN, UNG, USO, UUP, WEAT
by: Matthew Bradbard

Energy: I know it sounds like a broken record but it’s all about the 100 day MA in crude oil. Currently the 100 day MA in the June contract is $102.85. I remain bearish, looking for a trade below $100 this week or next. Both RBOB and heating oil finished lower today and it’s my opinion that weakness in the distillates will spill over into crude. I’m looking for a 10-15 cent break in the distillates. I’m getting a lot of grief for probing longs in natural gas again. Have I attempted this before - yes - but getting stopped out and trying again is trading. Taking small losses is the name of the game. For example currently a risk of 10 cents is $250-1,000 per contract depending if trading the mini or standard. If and when we see short covering I expect a quick 40-50 cent move. Risk to reward that works for me even if we need to be wrong three or four times first.

Stock Indices: The last two days stocks have been able to recover from their losses late last week. I would be short with tight stops or on the sidelines. The major catalyst that will set up the direction of the next leg will be the FOMC announcement tomorrow afternoon. Could equities advance? The answer is yes but I would fade that rally if it happens.

Metals: After seven straight losing sessions gold finally claimed a small victory gaining $11/ounce today. I see resistance in June at $1,660/1,665 with support $1,620/1,625. I still anticipate a sub $1,600 trade to come. July silver remains below $31/ounce and my take is $29 will be seen before any additional upside. As long as the 100 day MA caps any upside in copper I am neutral to bearish. That level in July futures is $3.68.

Softs: A short lived trade in cocoa as any shorts should have been stopped at a loss after the 3.6% appreciation today. Coffee advanced 2.5% today and has jumped nearly 6% in the last week. Another 4-6% and I would be willing to start issuing bearish trade recommendations again. The down sloping trend line that has capped rallies for the last nine months comes in at $1.95 in July.

Treasuries: Not for an out right futures trade but as a NOB spread or getting short futures and simultaneously selling out of the money puts in either 30-year bonds or 10-year notes I could be talked into some light bearish exposure. It is very preliminary and I would not have a large position into the Fed meeting but we are seeing preliminary signs of an interim top ... stay tuned. On a close below the 9 day MAs I would be eager to increase my exposure. Those levels are 141.25 in 30-year bonds and 131.19 in 10-year notes.

Livestock: Some clarification yesterday I said lean hogs were bouncing and unfortunately I was looking at a weekly chart and now reviewing my comments and looking at a daily charts I was mistaken. I hope this did not cause too much confusion and no monetary losses on trades ... again I apologize. Lean hogs continue to be pressured making new contract lows today and I see further downside. Limit move lower in both live and feeder cattle dragging prices to one year lows in live cattle. Expect more to follow as I do not see solid support until we see a 4-5% depreciation.

Grains: Both corn and wheat gave back overnight gains to close near their lows with corn lower by 0.75% and wheat virtually unchanged but approximately 15 cents off its highs depending on the contract month. This is not a bullish signal and if we do not see a recovery the next few days I would be back on the sidelines in corn and wheat. As for the corn/soybean spread - $8.25 needs to hold in the spread or I would be out of the trade. It is not about weakness in corn but rather strength in soybeans. July soybeans posted new contract highs approaching $15/bushel while November held onto the trend line mentioned in previous posts. Years ago I would never pictured buying soybeans in the teens but we could have several more dollars of upside.

Currencies: The U.S. dollar could see further downside which should be positive for other crosses but there are no screaming buys or sales in my opinion. Forcing a trade there looks to be more strength to come in the cable but we’ve already seen a 2% advance in the last week so tread lightly. The FOMC meeting is tomorrow and then BOJ to end the week so we could see fireworks in FX the next few days.

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.