Today in Commodities: When Will It End?

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Includes: AGF, BALB, GAZ, GLD, NIB, OIL, SGG, SLV, UDN, UUP
by: Matthew Bradbard

We had expected trading to slow down by this time but the volumes are still there and we’re seeing plenty of tradable action. $87.50-88 has served as major support in February Crude for the last week and that continued in today’s session. We’re starting to think we may not get a break lower, on a settlement above $90 we will advise clients to start initiating longs again. February natural gas was higher by 4.2% today trading back over the 50 day MA. Aggressive traders could scale into February futures or purchase February or March 50 cent call spreads. If trading futures place stops below the contract lows; which also may serve as a triple bottom…stay tuned. A fresh 10′ high in the indices but we’re still looking for a correction in the coming weeks. We’ve yet to advise clients to short futures but do still like the idea of purchasing March ES put spreads.

Looking at the charts it appears we may get a 2-3% appreciation in the dollar index in the coming weeks. If that plays out we feel the best way to trade is selling rallies in the Euro, Swissie or Pound. Live cattle traded back above the 20 day MA but settled just below that level. Aggressive traders can start re-establishing longs as we feel into next year we could see new contract highs followed by record highs. At the moment we’re entertaining selling calls and purchasing futures at a 1:1 ratio…stay tuned.

I’m still expecting a temporary set back in gold and silver but it will take a trade below the 20 day MA in silver and 50 day MA in gold before selling intensifies…only my opinion. Those levels come in at $28.60 in March silver and $1370 in February gold.

Though we do expect new contract highs in both corn and soybeans we’re anticipating a price correction first. We’ve advised clients to look to buy a 30-40 cent correction in corn and 50-80 cent correction in soybeans…stay tuned. Aggressive traders should be gaining bearish exposure in March cocoa anticipating a trade back to 2750. March cotton was limit higher again today trading to a new record high. Perhaps we’re a few days premature issuing bearish plays in cotton but by purchasing March put options we’re thinking in the coming weeks we could see a significant set back. If we make an interim top in the coming sessions we may start advising short futures but NOT yet. Continue to trail stops if long lumber as to not give back too much on longs. In the last two weeks January futures have advanced nearly 25%.

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