What I’ve learned over the years is if I’m trading what most people are trading I’m probably losing money for clients so it is OK to be contrarian with some of your investment themes. On the lows today July Crude was just over $1 from its February lows closing below $74 today while June Crude (the front month) is below $70 for the first time in 2010. We feel you should start scaling into longs as we’re close to an inflection point. Clients are buying August $5 call spreads. July natural gas was higher by almost 2% today and appears to be on the verge of breaking out to the upside. This should be on your radar but be careful as this market has fooled us before. On a settlement above $4.50 in July we should see shorts cover and a trade closer to $5.
If indices close below the 100 day MA there should be more selling in the coming sessions. We have downside objectives at 1075 in the S&P, 10170 in the Dow and 1800 in the NASDAQ. We’ve yet to make a move in cocoa but if prices can consolidate around 2800 we may start to probe longs for clients. Sugar needs to hold these levels or we will be advising clients to exit their recently bought longs in October. Some of our clients liquidated more of their OJ longs as we think prices are due for an interim correction. Coffee was lower by 1.3% but we would like to see a bit more before pricing out longs for clients. Aggressive traders can continue to sell Treasuries but understand this could be a bumpy ride. Additionally on the CPI and PPI in the coming sessions expect increased volatility.
Lean hogs broke the trend line that has held since February today and partially filled the first of 2 gaps we’ve been calling for. We still think there is more downside and have advised clients to trail stops on short futures and to put in gtc profit orders on their options. Across the board metals traded lower with gold down 0.30%, silver a loser by 1.6% and copper hit the hardest down by 5.78%. We anticipate more downside in metals and think there could be another 3-5% in gold and silver almost immediately. Those wishing to play the trend we would advise looking at long entries from lower levels as opposed to trying to play the short side. We should have some suggestions on both on a trade closer to $1182 in June gold and below $18 in July silver.
Clients were advised to offset their short July corn hedges today at a slight profit and remain long December. For new entries we’re suggesting buying September calls and December futures in corn. Look for more downside in soybeans and soy meal before establishing longs…stay tuned. December KCBOT wheat should continue to gain a premium to CBOT wheat as long as wheat prices are moving down. Clients were buyers of the Yen today expecting a trade above 1.1200 in the coming weeks. For more specifics contact us. On signs of a reversal in the US dollar we may look to buy some Euro-currency calls so stay tuned.
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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