Based on the late action we should see indices lead us higher next week. After an 8% rally in the previous four sessions Crude gave back some of its gain today closing down just over $1. The 9 day MA did hold and as long as that level supports we think higher ground ahead. That level is $73.25 in July and on a breach we would move to the sidelines. The distillates should continue to look for guidance from Crude oil. Natural gas gained just over 3% today but closes slightly lower on the week. We have advised clients to buy 20-40 cent dips. On that they would likely be buyers of September futures and September call spreads.
It has been a challenge sitting on our hands but we suggest selling a rally in indices only if we get it. On the S&P we see upside resistance at 1100, 1125 and then 1145. The higher price one sells at obviously the better. October sugar touched 16 cents today; our first target gaining 6.7% this week. On a further appreciation next week we will be advising clients to lighten up on their longs. Cotton was unable to break above resistance; we would suggest fading this rally via December futures with tight stops or purchasing December puts. We will likely explore bullish positions in November OJ next week for clients…stay tuned.
Coffee was higher by 6% on expiration, a large allocation by a fund and weather concerns. Unfortunately we missed this one*$? All clients’ profits in their NOB spreads were given back today. We still like the idea of being short Treasuries and those not yet in the trade can join us at a better price. Our target in September 30-yr bonds remains 120/121. Sloppy week in live cattle with prices were range bound and in our estimation finding support at these level. We suggest gaining long exposure in December live cattle.
The 20 day MA held today with gold finishing slightly higher on the week after posting a record high. As long as the trend line at $1215 in August gold holds stay long. July silver will end the week just below the 50 day MA higher by 4.5% on the week but much of that came on Monday. We have most client’s long futures and options thinking $19/ounce shortly. Agriculture was higher across the board; corn and oats settling near their weekly highs. Oats may not make the headlines but prices have advanced 20% in the last two weeks. Continue to buy corn as we think we’ve turned a corner. Much like the USDA report back in January put a top in Agriculture we think the USDA report this week may have put in a bottom. Clients are positioned long the Aussie looking for .8540 and then .8680. Others are short the Yen looking for a trade below 1.08.
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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