Today in Commodities: Positioned for a Mild Dollar Rally

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Includes: COW, DBA, ERO, FXC, GAZ, GLD, GRU, JYN, MOO, OIL, SLV, UDN, UUP
by: Matthew Bradbard

If the US dollar was to rally, what to do? Crude oil is down just over 2% as of this post and if prices were to close lower this would mark the first consecutive lower closes since late September. We maintain that on a further dollar appreciation Crude can come down $5 plus; the 38.3% Fibonacci retracement in December is at $75.70. Natural gas traded lower for the fourth consecutive session, losing 12% in that time. We suggest waiting for a trade below $5 to re-examine long opportunities.

Equities are down 1% as of this post; our targets remain the 50 day moving averages; in the Dow futures at 9600 and the S&P at 1040.

Just what the doctor ordered - a trade lower in agriculture. Clients are short oats and will be looking to be a buyer of corn and wheat for clients from lower levels; perhaps another 20/30 cents. Additionally we will be trying to position clients in a wheat spread; long Kansas city wheat and short Chicago wheat. Buy the correction in live cattle, we see support in December at 86.20 and then 85.65.

As we’ve suggested to much ridicule in recent weeks, we could see a correction in metals, gold is presently lower by $17/ounce and silver is lower by 60 cents/ounce. We will be looking to be an aggressive buyer of silver for clients closer to $16.

We advised clients to buy 30-yr bonds and sell 10-yr notes today expecting this spread to come in (NOB spread). Hello dollar! We suggest selling rallies in international currencies or buying dips in the dollar. Put stops above the recent highs in the international currencies and below the recent low in the dollar. Our featured plays would be selling Euro and/or the Loonie. On the yen we may be a buyer near 1.08 for clients, stay tuned.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.