Today in Commodities: Market Consolidation

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Includes: BALB, CORN, COW, DBA, FXC, FXY, GLD, JJA, JO, MOO, SGG, SLV, SPTL, SPY, UNG, USO
by: Matthew Bradbard

There was a two-sided trade in Crude as prices look to finish up 0.50% today. We have advised clients to exit their longs and expect a $3-5 correction into next week. Ideally we would be a buyer when August was below $75/barrel. We should have some trade ideas next week on September and October contracts. We’re sticking to our guns thinking natural gas will correct and allow our clients a long opportunity closer to $4.70 on the August contract.

We’re expecting a last gasp attempt at the 50 day MA in indices to get clients short. As it stands now we like selling the S&P above 1130 and will also be pricing out September ES puts options for clients from higher levels. Clients remain short Treasuries into next week (NOB spreads) expecting a trade to at least the 40 day MA; in September 30-year bonds at 121′18.

Aggressive traders could buy probes of October sugar closer to 15 cents (see yesterday’s post).Traders should continue to gain bearish exposure to December cotton via futures and options. We would back off any bearish plays in coffee as we view it too risky. Cattle on feed report came in around expectations and should have no significant impact on the market. We still like gaining long exposure in December live cattle via futures and options with clients.

Record high in gold again today with prices violating $1260. We expect to see a trade to $1300 in the coming weeks. If that happens we would look for an exit door for clients who are positioned long currently. Silver is above $19 as we predicted, gaining nearly $1 this week. On a trade above the May highs we would start lightening up on clients' long futures and options. We advised clients to roll all their July longs to September and would recommend you do the same.

December corn finished above the 40 day MA for the first time in three weeks but was unable to penetrate the trend line that has served as resistance since January. We will be covering clients' hedges next week on a set back and will be advising clients to gain more long exposure in September options and December futures. July oats partially filled the gap but we would need a trade closer to $2.40 next week to hit our objective of 8-10 cents on the July $2.50 puts.

Clients remain in their Yen puts but they could expire worthless next week; this would result in a $400 loss/per. Our favored currency play is short Loonie expecting .9550 in the coming weeks.

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