Today In Commodities: An Overzealous Fed

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

Energy: Crude has been in a $4 trading range going on nearly one month and for range traders I guess it has been ideal conditions but as for me and most traders I would prefer a trending market. It does not matter the direction but more movement is all I’m asking for. I remain bearish thinking we are due a trade under $100/barrel. Stiff support remains at the 100 day MA; in June at $102.90. A leg lower in heating oil and RBOB would likely contribute to a leg lower in crude ... stay tuned. Natural gas was higher by nearly 6% today to close above the 18 day MA for the first time since late February. This my friend could be the short covering rally I’ve spoken to. Do not rule out a trade to $2.40-2.50 in June.

Stock Indices: How I wonder the performance of a stock named after a fruit can have such a grave impact but impressive Apple (NASDAQ:AAPL) earnings aided in the stock market surge today. It also helped that the Fed may raise rates sooner than previously expected. Why is this good ... well circumstances appear to better at least in the Feds eyes. Indices are back above their short term MAs and likely moving higher but I will be absent as I do not want to be long at these elevated levels.

Metals: Lower trade was rejected in both gold and silver with prices closing virtually unchanged in both metals. To echo previous posts a trade above $1,660-$1,665 or below $1,620-$1,625 would determine the direction of the move short term. I have a bearish bias but would suggest playing the breakout. Silver prices remain under $31 but I expected more follow through after prices breached that level. Needless to say as long as we remain under $31 I remain bearish. The 100 day MA continues to act as resistance in copper with another failed rally attempt today. Use $3.7175 as your pivot point in the July contract.

Softs: After a 15% decline in the last month in sugar prices it has come time to book all remaining profits and move to the sidelines. It appears we could get a bounce from over sold levels. Bearish engulfing candle in coffee with today’s near 4% decline. I still want to see a higher sales price before initiating shorts for clients.

Treasuries: 30-year bonds and 10-year notes traded below their 9 day MAs today but both managed to pare losses and close above that pivot point. Not just a trade but consecutive closes would confirm my feeling of an interim top in these instruments. In June 30-year bonds that level is 141.30 and in 10-year notes at 131.21. A NOB spread short 30-year and long 10-year is the play in my opinion.

Livestock: Cattle held on with marginal gains today after yesterday’s bloodbath but an inside day is not exactly bullish. Expect further downside. Both live and feeder cattle should see lower long entries in the days to come ... stay tuned. Lean hogs were higher by 1% but volumes remain light so it is too early to call a bottom. Buying hogs is catching a falling knife which I would refrain from in this market currently.

Grains: With corn on the verge of breaking $6/bushel I would walk away from any longs in maize. Traders that are long wheat from last week could move to the sidelines as we could see back and fill here as well. May and July soybeans posted new contract highs while November looks poised to challenge $14 in the coming sessions. This is the only long candidate in this complex currently in my opinion. Exit the corn/soybean spreads at even or a slight loss. I will attempt to buy this again when corn bottoms as long as the spread does not exceed $8.50.

Currencies: The dollar index continues to grind lower registering losses seven out for the last eight sessions. As long as this continues expect all crosses with the exception of the yen to track higher. The pound continues to be the leader of the pack gaining the last eight sessions lifting prices to six month highs. The FOMC did nothing with IRs today but indicated they may act sooner than the market had previously factored in. How the Fed telegraphing higher rates is to be interpreted a bullish ... welcome to the NEW market.

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.