Today In Commodities: Roll With The Punches

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Includes: BALB, COW, DBA, FXF, GRU, MOO, NIB, UNG, USO
by: Matthew Bradbard

It’s a grind…not every day is paradise, but trading is a marathon not a sprint. The key is disciplined money management -- always keeping your eyes on the ball.

Near its lows today November Crude had completed a 50% Fibonacci retracement but technically speaking we think a 61.8% retracement is due, which would drag November back to $84/barrel. We’ve voiced to clients that we would be interested in establishing longs in November and December contracts from lower levels. Under $4 we feel natural gas is a buy. Our suggestion remains bullish exposure in November or December contracts via futures or 50 cent bull call spreads.

Stocks looked ugly to begin the week but by the session end they fought back to close near their 40 day MAs. Use that level as your pivot point…in the Dow at 11340 and 1195 in the S&P. We are looking for a selling opportunity with aggressive clients on an appreciation of 2-4%. The immediate direction should be determined by murmurs from the Fed over the next 24-48 hours. The 20 day MA continues to act as the pivot point as 10-yr notes may have sucked some traders short trading below this level for only a short time. The immediate direction will be determined by the FOMC; our bias is bearish but the trade does not agree. The sidelines is likely the best trade until we get a clearer picture.

We see chart damage and view the metals (gold and silver) as a sale on rallies but over the next two days leading into the FOMC we expect a bounce…trade accordingly. Maybe $50 in gold and $2 in silver which aggressive traders could try to capitalize from the long side or one could gain bearish exposure if we get a rally.

The greenback gapped higher but was unable to hold onto early gains showing signs of exhaustion. Without a new high this week we would expect an about face and trade lower in the almighty buck -- closer to 75.00 in December. The trade in my opinion, even though the chart is a bit scary, is longs in the Swissie playing a bounce off the massive whack the franc took after the intervention a few weeks ago. We have a target of 1.2000 in December.

Cocoa futures are off nearly 14% in the last three weeks, losing ground the last ten consecutive sessions. Aggressive traders have started to scale into longs in March 2012 contracts thinking we’ve overshot to the downside. A trade back to the 50 day MA would lift prices north of 3000; trade accordingly. Clients remain long; when they get out of OJ and/or cocoa we’d be willing to get bearishly positioned in cotton assuming prices remain around these levels.

Ags finished lower today but corn fought back to close nearly unchanged. Not so much of a recovery in soybeans to end the day though as beans closed lower by 1.44% and wheat lower by 2.22%. If the 100 day MA holds in corn over the next few days we may gain bearish exposure with clients in December and March; stay tuned. Live cattle traded below the 20 day MA for the first time in two weeks and with bullish articles in the WSJ and USA today we like our bearish exposure, thinking clients could ride a trade down to $1.15/1.16 in December futures. We do expect cattle to be short months from now, but in the immediate future we’re bearish. We expect to reverse from lower levels to ride cattle to potentially new contract highs.

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