Call it the summer doldrums, but a majority of markets appear to be waffling back and forth. October Crude appears to be digging in its heels around the $75/barrel level. Aggressive traders could probe longs as we see prices back over $80 in the coming weeks. In this sector if forced to pick just one market we would prefer to be buying natural gas at these levels as opposed to Crude. With the 2.4% break in October natural gas prices are at fresh 2010 lows for this contract. We recognize we’re catching a falling knife for clients so we recommend a small position until prices find a bottom. Today clients were buyers of the November $4.80/5.50 call spreads for just under $1500/per plus fees.
Prices on the indices are in no man's land and could break 4% in either direction; our bias remains bearish but we would suggest trailing down stops in case prices rally in futures. As for options, we suggest some type of position to take advantage of a sideways to down market as opposed to an outright bearish play. Position yourself in a way that a 5% rally will not result in a large loss.
Aggressive traders should remain short December cotton via options. As we voiced in recent posts, a 16% appreciation in our eyes is not justified. The trend in OJ remains down as prices hit four-month lows today, having lost almost 10% in the last two weeks.
The flight to quality continues to lift Treasury prices as prices advanced to new highs. As I said to one of my clients today, “being long Treasuries will continue to work until it does NOT.” This will end badly in my opinion but there is no top in sight!
Look for some bullish live cattle trading ideas this week ahead of the Cattle on feed report due out Friday. We may have to revise our buy objectives for clients to higher levels in the October and December contracts… stay tuned.
Gold could top out tomorrow but you know the saying,” the trend is your friend.” As long as the 50 day MA holds at $1214 traders could be long. September silver is back above the 50 and 100 day MAs having gained just over 50 cents in the last three sessions. Aggressive traders could be long with stops just below those levels. We still like purchasing December call spreads for clients as well.
Wheat lost just over 5% today on fund selling and some changes in weather in Russia. Aggressive traders could get short expecting a $1-1.50 break in futures on increased fund selling and/or more positive weather news out of Russia. A 61.8% Fibonacci retracement would drag wheat prices back under $6/bushel. Prices were over $8 just over one week ago. On continued weakness in wheat look for ALL grain prices to back off. We suggest using this setback to buy December 2010 or December 2011 corn.
The US dollar had its first down day in six sessions. A trade above 83.30 should signal 84.75, a trade below 82.20 should signal a trade under 81.00. We continue to think fading rallies in the Euro, Aussie and Loonie makes sense. We would back off trades in the Swissie for now.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.