Today in Commodities: Turning Point

by: Matthew Bradbard

Markets should be topping and bottoming soon. Crude oil was higher by 1.3% today as speculative dollars continue to put into alternative investments. We feel oil and the distillates are over valued but we would be careful about jumping in front of this train. Another 2% decline today has natural gas on our radar; aggressive clients started buying July 50 cent call spreads today and we will be looking at a long futures entry in the next few sessions. The sentiment is too bullish in equities for this run to continue in my opinion. Aggressive traders should start scaling into shorts or purchase June put spreads.

The ECB raised rates 0.25% and the BoE left rates alone. Currencies were flat…our favored play is bearish trades in the Aussie. Lean hogs closed below the 20 day MA today as there should be more downside. Traders with multiple positions should start taking profits. Live cattle should continue to trade lower as well …look for long entries from lower levels. Gold and silver gained again today…we remain on the sidelines with most clients. Continue to buy cocoa at these levels as once we see a close above the 50 day MA we should see an acceleration higher, our target remains 3300 in the July contract. Stay short agriculture in corn and wheat as we expect more downside into next week. Oats closed near their lows losing nearly 5% today which generally leads this whole complex. Mixed bag in Treasuries, our target remains 122’00 in 30-yr bonds and 121’00 in 10-yr notes.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial.