As long as indices tread water or move higher money should flow back into commodities and out of Treasuries and the US dollar. Crude followed thru today and now has the 20 day MA in its sights. As we said yesterday as long as equities move higher we think we could see Crude appreciate $3-5 relatively quickly. As of this post August is higher by $1.70. For the time being we would treat Crude as a range trade with resistance around $80 and support around $70. We advise position traders to remain long as long as August holds the $73.40 level. With an additional $3-4 move north in crude we should see the distillate move approximately 15 cents. August natural gas broke $4.50 today; futures traders should take off their longs at a loss. We continue to like buying clients October 50 cent call spreads but they may get clipped a little in premium in the coming sessions. That being said scale into the trade and do not try to outsmart the market.
Sideways congestion in indices was expected after yesterday. We’re looking to be a seller from higher levels in the S&P. It is my opinion we will see upside surprises on earnings that will paint a false hope allowing our clients to get short closer to 1100 in the coming weeks. We worked out of some of our client’s longs in October sugar today and hope to see a higher trade tomorrow and to work out of the remainder. Inside day in cotton today; clients need a trade at/or around 73 cents in December to get filled on their gtc profit orders. OJ was lower by 5.43% today. Another 7-10% decline and we may have an interest in buying November calls for clients. Aggressive traders can continue to short Treasuries with stops above the recent highs. As we said yesterday we’re looking to lighten our clients exposure in currencies before stepping into September NOB spreads.
Trail stops up on your live cattle longs; we remain bullish but prices have appreciated nearly 4% in the last three weeks and nothing moves in a straight line. Buyers were able to support silver again today with September closing flat on the day but remaining above the 100 day MA. We suggest longs in September futures and purchasing December call spreads. In our opinion gold could go either way; we would use a settlement above $1216 or below $1173 to signal the direction of the next leg. September copper failed to get above the 50 day MA today; a level that served as resistance last week as well. We would expect a trade above $3.06 to lead to a probe of $3.20-3.25. We are satisfied with the performance in grains of late but the problem is we’re anticipating a setback to add to longs for clients and to remove previously placed hedges.
Tomorrow morning’s USDA supply and demand report could deliver the set back we’ve anticipated. Use setbacks in agriculture to be a buyer. The Loonie continues to work higher and we suggest buying dips. The Swissie which some clients are currently short continues to stubbornly inch higher. We still anticipate a trade back to .9200 but if we do not roll over soon we will cut losses. As expected the BoE left rates at 0.50% and the ECB at 1.0%.
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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