Oil will finish down today but notice the chart pattern: a higher low and higher high. We think scaling into longs at these levels makes sense as a trade back over $80 is expected in the coming weeks. The distillates are expected to find support at the current levels as well; RBOB and heating oil have been unable to make new lows in the recent sessions. Ugly reversal lower in natural gas today with a 20-25 cent trading range. It’s tough getting too bullish but this is reminiscent of the feel we got last year around this time when we started buying clients natural gas. As traders you know past performance is not indicative of future results, but those who exercised patience last year were handsomely rewarded. We still believe in the coming month we’ll see prices back close to $5.50.
Jobless claims hit the markets hard today as 500,000 is a big number. As of this post prices have traded below the 200 day MA in the Dow and S&P but we are paring losses and should close above those levels. We continue to think a trading range for the remainder of the summer between 1125 and 1025.
Lumber has appreciated just over 6% this week and looks to be breaking out to the upside. We expect $250 on the November contract.
The extreme temperatures domestically and abroad are having their impact in the cattle market as live cattle advanced to fresh 2010 highs, gaining 4% this week. We feel livestock and Agriculture could be the standouts in the coming weeks.
So far this month December gold has appreciated 4.2% virtually straight up. This is far from a parabolic move, but as prices get overbought a correction may be looming. Those long we suggest having an exit strategy if prices start to sour. We could see a $25-40 correction with very little chart damage. Silver has lost ground the last two sessions but yet the 50 day and 100 day MAs have supported on a closing basis. One of my co-workers pointed out the ascending triangle on the daily chart in silver and it appears before we reach the apex next week we could get a significant move. About 70% of the time the breakout is in the direction of the trend, which is up…time will tell. Some clients have a small long futures position or December call spreads.
Soybeans were down 1.8% today and appear to be moving lower. Exports were off the charts in corn and wheat today! Corn looks like a correction may play out; we suggest buying dips in either December 2010 or December 2011 futures. Wheat was higher by 3.85% today but I still think a large correction could occur. We would not trade futures in wheat at the moment but put options are advised. If the dollar can settle above the 31 EMA at 82.75 we think we could see a further correction in the Euro, Aussie and Loonie.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.