We have continued to do our weekly newsletters and daily blogs as scheduled but have not done as many topic specific articles of late. We are reaching out to get some suggestions from would be commodity investors or active traders on some topics of interest or subjects you would like clarified. This week we will be publishing an article on why understanding the “Greeks” is important to commodity options trading. Please comment for further suggestions.
Stocks: The Dow rose 223 points or 2.7% to 8500, the S&P picked up 3.6% or 32 points to 919 while the NASDAQ gained 82 points or 5% to 1774. With May now at our backs we’ve put in three positive months in a row, marking the best 3 month performance by percentage since 98′. This is an improvement from the doomsayer’s just months ago. We’ve been consistent in our assessment and still expect a 10-15% correction is around the corner. For much of May the S&P was range bound between 875 and 930 and the Dow between 8100 and 8550, will this continue? Although we expect a downward break, the move out of these ranges should signal the next direction.
Bonds: September 30-yr bonds were lower by 11.5 ticks last week; trading lower 9 out of the last 10 weeks. Prices were able to rally just over 3 basis points off the weekly lows so we should get an additional bounce. Support is seen between 116’10/116’20 with resistance at 118’20. In the coming weeks we expect a move up to 120’00/121’00. September 10-yr notes were lower by 18.5 ticks last week. Support is seen at 116’00 while resistance comes in between 117’20/118’00. As for the Euro-dollar, stay short March 10′ as long as 99.095 remains as the contract high. As for options we advised clients to buy December 09′ 99.00, 98.75, and 98.50 puts. Contact us for pricing. NFP # out Friday; loss of 525,000 jobs and unemployment rate just over 9% is factored in.
There are multiple central bank meetings this week; RBA on Tuesday, BoE, ECB and BoC on Thursday.
The commodity currencies racked up big gains last week. The Aussie finished 164 ticks higher and in the last 13 weeks has made it to higher ground 10 of those weeks. For the month of May the Aussie finished 27% higher. We could see a 5-8 cent correction with no chart damage. Resistance is at .8100 while support is at .7850 followed by .7700. The Loonie gained 223 ticks, higher the last 9 days. It continues to follow energies and metals which have burst higher of late. Resistance is between .9225/.9275. .9000 should serve as support but don’t rule out a trade to .8700.
The Kiwi picked up 216 ticks and has been positive 5 out of the last 6 weeks. Support is seen at .6250 while resistance is at .6500. These 3 currencies may have moved too far too fast and a correction should follow.
The Euro was higher by 108 ticks last week as all attempts at lower trades were met with buying. Support comes in between 1.39/1.3925 while resistance comes in at 1.4175 followed by 1.4350.
The Swissie continues to follow the Euro’s lead, up 141 ticks last week trading to levels not seen since January. Resistance comes in at .9450 and support at .9250.
The British pound was higher by 215 ticks last week trading to a 7 month high and after 2 failed attempts to get short we would stand aside. Resistance is seen at 1.6425 and support at 1.5725.
The yen was lower by 50 ticks last week but things could have been much worse if had not been for the 189 tick advance on Friday. Support is seen at the 50 day moving average at 1.0250 while resistance comes in between 1.06/1.0625. We advised clients to buy July 105/108 call spreads last week for $1000 with a target of $2000+.
The US dollar was lower by 74 ticks last week to trade to its lowest price since 9/8 making a new 8 month low. We see no significant support until 77.50 but prices are over extended to the downside so don’t rule out a dead cat bounce. Resistance comes in at 80.00 followed by 81.00.
August gold closed up $21.30, the highest close since late February. Now that prices are thru 975 we may see prices trade back to the mythical 1000 mark. The contract high for August in 09′ is $1008.90 and in 08′ is $1020.70.Will we see a new high this week? We remain long option spreads for clients, on new positions last week we bought clients the October 1000/1200 spread for just under $4,000. Gold has been higher for the last 4 weeks and while the weekly and monthly charts still look like there is more upside, the daily chart is not as friendly as prices are becoming increasingly overbought. Support is seen between 960/965 followed by the 9 day moving average at 950.
July silver closed up 89 cents, the highest close in nine months. On the month of May prices gained 27%, its largest monthly dollar gain since January 83′. Prices have now made their way back over the 50% Fibonacci retracement level assuming a high just below $22 and a low just below $9. Support is seen at 15.25 with resistance first at 16.25 followed by the 61.8% Fibonacci level at 16.75. We advised clients to exit their remaining December $15/20 call spreads between $6,600/7,000. We had been in that trade for 5 months at an average cost of $2,000; not too bad. With the proceeds we advised clients to buy September $16/19 call spreads for approximately $3,300. The logic was to raise cash, book a profit and have more monies to play a correction. On a further advance we still have exposure and will look for a profit of $1,000/1,500. On a correction we have the option to buy back the $19 or to buy more silver with the remaining cash.
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Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.