Monday or Tuesday expect regulators to change the rules to the game. This should cause more volatility in my opinion as opposed to less but time will tell.
Crude and the distillates fell hard today as expected and prices hit our $72 price objective. Though it may be a few days premature clients were advised to start buying Crude today. We have yet to commit on futures but on signs of stabilization we will probe longs in July for clients next week. Today clients were buyers of $5 call spreads in August. We expect in the coming weeks to see this contract back in the mid $80’s. The charts are ugly but sometimes you have to close your eyes and buy. Inside day in natural gas but prices managed to keep their head above water. Some clients still hold longs others took a profit yesterday when prices failed to get above $4.40. We are mildly bullish but need to see a settlement above $4.40 soon to remain in longs with clients.
Clients were looking for weakness into the weekend and the indices delivered cutting thru the 100 day MA and as of this post prices are near their lows down 2-3%. We expect more downside and have convinced most clients to hold there June ES puts anticipating 1075 next week. Sugar was down 3.6% today and is back below the 9 day MA. Hopefully not a false breakout but pay close attention to the action early next week. Clients are positioned long but will be forced to cut loses if we do not see a trade higher next week. We got partial fills for some clients to exiting their OJ longs. Continue to scale out of longs as we think a setback is on the horizon. Coffee lost 2% today; still we would like to see a trade closer to $1.30 before exploring longs for clients.
Treasuries remain in our opinion a sell rallies market but days like today remind me of the risk as prices were up over 1%. This trade may take a few weeks to develop so be patient. Live cattle broke down today but we failed to make a move as it happened so quickly. Prices broke the 20 day MA for the first time in several weeks so we think there could be more downside. A 50% Fibonacci retracement on the move from December would drag prices in August back closer to 89/90 cents. Lean hogs also broke down today closing below the 20 day MA. This is the confirmation we’ve been waiting for. Clients still hold August shorts and should be able to capitalize on a move under 81 cents.
Copper lost 4% today closing below the 200 day MA. Believe it or not clients that were long put options exited today at a small loss even with prices collapsing. This is the reason why we have no interest in trading copper options again on behalf of clients. Indecision in the gold and silver market today with wild trading ranges; June gold $32 and July silver 76 cents. We expect both to break lower but do not take this as a short recommendation we have just lightened up or exited longs for clients. Those not willing to leave positions were advised to tighten up stops.
Agriculture was hit today with prices on grains falling 1-2.50%. Clients will be buying this dip in corn via September options and December futures. Outside of that the only trade we like is long KCBOT wheat against short CBOT wheat. Clients exited their Loonie shorts from yesterday at a nice profit. Next week we will continue to sell rallies in the Loonie and Pound for clients. The US dollar ended the week strong gaining over 1% today. In our opinion this is near a trend change; look for more specifics in our commentary next week.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
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