Today in Commodities: Suspension of Disbelief

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Includes: DB, FXY, GRU, MOO, NIB, SGG
by: Matthew Bradbard

Oil higher: I would say I told you so but followers already know we recommended to get long in recent sessions. The fact that inventories were drawn down by over 8 Million barrels when the market had expected a build certainly helped, not to mention a falling dollar. We should see another $1/2 on the upside. If so it will be interesting to see if we get more buying taking prices to a new high or if we turn around and head lower. Natural gas was a dog TODAY but we continue to advise long exposure. This is the type of trade that you buy and then sit on your hands. The November $5/6 call spreads were just over $1900 today.

If currency traders took our advice on the Yen based on Monday’s commentary, start to look for an exit at a profit next few sessions.

Volatility in corn and wheat was most likely due to the CFTC re-classifying Deutsche Bank (NYSE:DB) from a hedger to speculator, expect more fireworks from this.

If you have the intestinal fortitude, it may make sense to have some long exposure in gold and silver but this is not for the faint of heart.

A triple bottom has formed in the S&P and although we are not bullish, it appears we will see further upside; we advised clients to cut losses on their puts, losing $150-250/per.

A base is building in live cattle and lean hogs, we have clients long. On continued dollar weakness we may lose money in cocoa, clients are short and an inverse relationship exist to the US dollar. You do the math. We are once again re-visiting the idea of getting long sugar as a correction may not come, higher by 4% today. Based on talking with floor traders, deep out of the money (40 & 50 cent) calls with lots of time are being bought.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results.