Not just a canceled television show but an accurate description of most major asset classes. This volatility will persist at least into next week so be careful there is no reason to be a hero. In just over one week oil has given back gains from the last three months. There will be a time to get long but first we would like to see if the $72 level in June will be challenged. At this point we are more interested in probing long than selling rallies. We may have some bullish ideas next week…stay tuned.
This still holding onto longs in RBOB and or heating oil if we get a 15-20 cent rally for whatever reason we suggest unwinding all your positions as we think an interim top is in place. Natural gas appears to be forming a base as prices have wandered in a 15 cent trading all this week. Our suggestion remains purchasing September 50 cent call spreads. Cocoa was lower by nearly 6% today, on a trade below 3000 in July which serves as a 61.8% Fibonacci retracement cocoa longs start to be on our radar. July sugar touched 13 cents today but pared its losses closing at 13.75. We are advising buying October 10′ calls and March 11′ calls. We may start to get clients long futures if we see a bounce early next week.
Aggressive traders could start to gain short exposure in Treasuries; possible suggestions would be purchasing puts, short 30-yr bond futures (with stops) or NOB spreads (short 30-yr bonds long 10-yr notes). Clients are short June and August lean hogs expecting the 20 day MA to give way and the gap from late March to be filled. Gold closed above $1200/ounce for the first time in 2010. We may see a new record high next week but as most followers know we prefer silver and clients are back in as of today. As we said yesterday we wanted to wait till the NFP #, which came out well above expectations at 290,000?#!@ Clients were advised to buy $2 call spreads in September silver thinking the next leg will lift prices to $20.50/20.75. Clients that already did not have exposure in corn were advised to buy September calls today.
We do not suggest having all your eggs in one basket though being it is possible we get a bearish USDA report next Tuesday. Soybeans and soy meal are starting to show signs of life but we’ve yet to make a move and will likely wait for the USDA report before committing capital for clients. We will re explore the idea of short exposure in wheat as well next week.
As of this post the dollar is down for the first time in four sessions. On the week it looks like we should close up about 3.25%. Currencies by far have been the most volatile commodity sector this week so we would suggest only the risk adverse trade here. Additionally recommendation this afternoon may be different this evening and surely Sunday evening so for specifics contact us or check out our commentary issued Monday morning. Our clients only open position in currencies is September Loonie puts.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.