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Swing Trading Commodity Spreads
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Catch That Knife
  • Is The Bearish Storage Number The Signal To Short Natural Gas?

    On Thursday we saw an injection into storage of 58 BCF (exp 54 BCF), which sent natural gas prices lower.

    Natural gas has been on a bit of an uptrend over the last month on the back of an extended hot streak.

    While the weather is above average for this time of year, as it's not the peak of summer, we probably shouldn't expect power demand to be quite as high.

    (click to enlarge)

    I've been watching with an eye to getting short the Nov13/Jan14 spread as the shoulder months, periods of lower demand, are approaching.

    This week we also saw some storm activity on the horizon which had traders thinking about the possibility of weather factors in the near future. This added to the bullish tone early, but nothing really eventuated of any relevance to the US.

    All these things have seen the Nov13/Jan14 spread trade at levels well off what we would expect for this time of year. Traditionally this one hasn't really traded above 20 in the last 10 years or so.

    Seasonally the window opens on the 18th of September but I like these levels so I'll jump in a touch sooner. If you're patient you can probably even work a better price as we often get a pullback on the back of a sharp reversal.

    Sep 05 10:59 PM | Link | Comment!
  • Is It Time To Short Coffee?

    I've had my eye on a couple of coffee spreads over the last few weeks looking for a sight pullback.

    In that time we've seen continued weakness in the real, a Brazilian rate rise, Central Bank intervention and frost fears.

    However none of those factors have been able to get coffee (or the spreads) to really bounce.

    (click to enlarge)

    That makes me think that there is just a lot of weakness given the large amount of supply and potential supply.

    I'm looking to get short this spread and let it drift over the next few months.

    Sep 05 3:48 AM | Link | Comment!
  • Are Managed Money Finally Going To Cut Their Long Position In Lean Hogs?

    After a five month run of managed money increasing their net long positions, finally we appear to be getting toward a top.

    In the last reporting period large speculators reduced their long wagers by 3500 contracts.

    (click to enlarge)

    The net reduction was not unexpected as we saw a sharp move lower in prices two weeks ago.

    Lean hogs have been at a COT extreme in recent times and could be poised for a sharp sell-off should some of the big players elect to cover.

    The heat wave through much of the US has been putting pressure on weights and last week we also saw some strong export demand, putting a bit of a short term floor in the market.

    I'm still holding my bear spread (short position), looking for some seasonal weakness.

    Sep 03 9:35 AM | Link | Comment!
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