Listen to the Market

Crude held yesterday’s low finishing marginally higher today. This is a first sign that the downside movement may be drawing to a close. We are not advocating fresh long entries yet but we’re getting close…stay tuned. As for the distillates hedgers should have light long protection on in fall heating oil and RBOB contracts. Natural gas gave up another 3% today failing to hold the $4.50 level closing below the 40 day MA for the first time in three weeks. Apparently we left our clients shorts too early and at this moment we’re not prepared to catch this falling knife. We will look for long entries from lower levels…stay tuned.

Equities were able to trade slightly higher today but we still think a coin toss on which direction from here so we have no long/short suggestions or bias. The US dollar failed to hold onto its gains today closing near its lows on the session. The next few days’ action will be critical but could the 4% appreciation the last week be all she wrote? We see no new trade ideas as the safest place in this sector is likely the sidelines. Lean hogs were lower for the first time in eight trading days. This has been a nice ride for longs and being this move has carried prices to overbought levels we suggest booking profits on longs. Live cattle were higher by their daily trading limit today closing at their highest level in one month.

Both gold and silver closed slightly higher today. The charts are looking friendlier and we really like how the metals held in considering the action in outside markets the last two days. This weakness being shrugged off by both metals is telling me that on just a little bullish news we should start another leg higher in gold and silver. If we see a new high for the week tomorrow in gold expect a challenge of the record high in gold and a run to $40/ounce in silver in the coming weeks.

Cocoa lost 3% today and sugar reversed to close 3.25% higher. We stand our ground bullish cocoa and bearish sugar but today was not the best day for clients in those trades. Cotton and coffee remain on our sell list losing 4% and 2% respectively today. Unfortunately we need to work out of clients cocoa and sugar positions as we do not like having too much exposure in any one sector at a time. Grains got drilled again today with corn down 3%, soybeans just over 1% and wheat nearly 5%. Take your outright shorts off but we will stay in the corn/wheat spread for clients…see previous posts. My suggestion is to exit bearish trades in Treasuries as I’m like you tired of looking at this losing trade on my blotter and we could see continued upside.

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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