Today in Commodities: Better Late Than Absent

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Includes: BALB, COW, DBA, GLD, JJA, MOO, NIB, SGG, SLV, UNG, USO
by: Matthew Bradbard

Crude was positive all five sessions this week and though we expect back and fill action with prices above $85.40 a trade, up to $90 looks likely. Natural gas is finally above the 20 day MA and looks poised to break above the trend line that has capped all rallies since mid-Summer. We’re suggesting light bullish exposure in January contracts looking to add on a settlement above $4.30 in January.

On a retracement lower in equities after the 3.0-3.5% appreciation this week; we will be advising clients to cut losses on their December ES bearish option plays. At this juncture we do not wish to be long but that could change in the coming weeks… stay tuned. Clients have NO long or short exposure in Treasuries.

Clients were advised to exit their bearish plays in cocoa today as prices reach a four week low. If there are any bubbles on commodities we feel sugar and cotton fit the bill. Apparently Goldman agrees as their research projects a 30% plus correction in the next three months in both commodities. In the coming weeks aggressive traders will be advised to buck the trend and gain bearish exposure. As we said yesterday we project there to be more long trades than short trades, but not in cotton or sugar.

We anticipate more upside in live cattle and lean hogs in the coming weeks. Clients will be trading December ’10 hogs and ’11 live cattle contracts. Our target in lean hogs is 70/71 cents and expect live cattle to make new contract highs. Agriculture is a buy in our eyes; corn, wheat or soybeans. Remember there is a USDA report next week so do not use all your bullets.

Gold is at a fresh record high and should continue to move higher. We expect a trade north of $1450 this month… trade accordingly. We prefer plays in silver and have advised clients bullish exposure in ’11 contracts. Depending on your risk tolerance, the standard contract, mini -futures or call options. We anticipate a trade north of $30 by year's end. We’ve mentioned a few times this week buying silver against a sale in gold and that has worked out well this week and should continue on the way up. Again the idea is traders will make more money in silver than they lose in gold.

Currencies are rolling over but we’ve been fooled too many times and a 1% gain in the dollar today was a nice finish to the week, though major chart damage was done this week. As it stands now, some clients are carrying small losses in the Loonie and Yen expecting a further appreciation. We’re in no rush to commit new capital in forex.

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