China Move – a potential game changer

After making a new high Crude failed and closed almost $2 off its’ intra-day high. We suggest exiting all remaining longs as we suspect a set back. We anticipate a challenge of at least the 20 day MA; in August that level is $75.15. We’re not suggesting getting short but rather moving to the sidelines. Natural gas finally filled the gap we’d been calling for today; at $5.865 on the August contract. Aggressive traders could scale into longs with tight stops though they’d be catching a falling knife. The more prudent move may be to see if the trend line at $4.80 holds. In a perfect world $4.55-4.65 in August serves as the ideal long entry.
A failed rally in indices as the 50 day MA acted as stiff resistance…this may sound familiar as we forecast this exact scenario in recent posts. From here aggressive traders could fade rallies in the S&P and ES. Today most clients started to buy September ES puts. First target in the futures is 1075 followed by 1045. October sugar gained 3.77% today closing just under 16 cents. We continue to feel this contract is a buy near 15 cents and a sale near 16.50 cents. Traders still holding October longs COULD get a push to 17/17.50 but if that lucky we would suggest exiting the trade. We continue to suggest selling December cotton at these levels anticipating a trade back under 75 cents is in the future.
September lumber was lower by 4.28% today reaching a seven month low. Bottom pickers this commodity should be on your radar. We advised clients to exit their NOB spreads at a small profit this morning when 30-yr bonds could not breach 122′20 and it appeared equities were rolling over as to their inverse relationship. Apparently the market liked the Cattle on feed report as cattle were well bid today gaining nearly 1%. We continue to suggest bullish exposure in December live cattle. Lean hogs were higher by 2% today; prices have retraced 61.8% in the last two weeks. We’re not suggesting shorts yet but our bullish objective was obtained today.
Key reversal in the metals today; we liquidated ALL clients bullish gold and silver today. As for gold if the trend line gives way at $1235 we could see $1155-1175 soon there after. We will be looking to re-establish longs for clients after the coming wash out (as we see it). Silver made a new high and failed forming a bearish engulfing candle on the daily chart. We expect $17.80 and potentially $17.25.
Corn is allowing us to lift our July hedges for clients and get more length in the September options and December futures. As we’ve said use this set back as a buying opportunity. Trail stops on your longs in soybeans and soy meal. We would need to see $2.40 in July oats to hit clients profit objectives in their July $2.50 oat puts; current price $2.64′4. The US dollar likely bottomed today and if indices move lower the dollar should gain this week. Our upside target is the 20 day MA at 87.30. Clients were advised to cut losses on their Yen puts today; a loss of $328/per including our fees. Our featured currency play is bearish exposure in the Loonie with clients via futures and options expecting a trade to .9550 in the coming weeks.
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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