Today in Commodities: Follow the Dollar

by: Matthew Bradbard

The direction of the dollar should impact a number of commodities in the coming session but wait for a confirmation tomorrow. Crude is still waffling back and forth trying to decide on a direction from here. Our bias remains to the downside and being prices were only higher by just over 50 cents with the dollar down nearly 1% today I think I’m right…stay tuned. As we voiced last week we’re expecting $85 from here. Like Crude natural gas has yet to decide a direction, trading in a 30-35 cent range for the last week. We have no opinion at this juncture in natural gas and suggest the sidelines. The S&P and Dow look poised to finish in the green while the NASDAQ in the red in today’s session. Some of our more aggressive clients have started to buy bear put spreads in March ES options. We sense we’re close to an interim top and looking for a trade back near 1170. The dollar should settle below the 20 day MA today…regular followers recall this is our confirmation that the dollar should head south and other crosses north.

Our suggestion remains buying dips in the Swissie, Euro and Pound. As of this post the Swissie is higher by 1.37%, the Euro by 1.20% and finally the Pound .39%. Live cattle was a gainer today but failed to close above the 20 day MA. A close above 105.00 in February live cattle we may opt to re-establish longs for clients…stay tuned.

Metals were higher across the board; gold by $10/ounce, silver $1.00/ounce and copper by 10 cents. We’re still anticipating more work to the downside in both gold and silver but the next few sessions could be painful. Fortunately our clients are in bearish options positions and NOT futures in silver.

Continue to buy dips in corn and soybean contracts as an upside break out today could be the beginning of the march to fresh contract highs. Roughly an additional 30 cents in corn and 50 cents in soybeans. March sugar gained 4.67% today lifting prices to one month highs; unfortunately with the time decay in our clients' options they need a little higher trade to reach their profit objective. A trade closer to 31 cents should get it done. Clients were advised to lightly start buying cocoa today. We see support just under today’s low and have an upside target of 3050. The prospect of a potential freeze in Florida tonight likely aided in the near 4% appreciation in OJ; clients have NO exposure. Those long lumber continue to trail stops. We will be looking to establish longs in coffee for clients on a set back. Understand we may miss this one depending on how long it takes to work out of clients' cocoa positions.

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