OPEC sets the tone

No action by OPEC today reverses Crude and from here we should see higher pricing. July futures settled back over the 9 day MA and we should be on way to the 40 day MA at $104.50. The only dynamic that could slow appreciation is if we see a dramatic pop in the US dollar which at this juncture does not look likely. WE would be a buyer of dips in Crude and the distillates for speculators. Extreme hot weather has not allowed natural gas to correct as forecast but we continue to see significant resistance just above the recent highs. Aggressive traders should be positioned to play a 30 cent break and then look to reverse and get long in fall or winter contracts. Day six of a correction in indices as prices are approaching four month lows. We will be looking for signs to get long but would like to see some sort of evidence before initiating positions. At this point we still cannot rule out a probe to the March lows approximately 2.9% from current levels.

The dollar should experience a dead cat bounce from here but as we’ve said in previous posts not more than 1.5-2.0%. Exit all longs in European crosses and look to re enter from lower levels. Some clients are long the Loonie and some also got short the Swissie today. A possible trade could be to initiate that spread 1:1 in futures as well. July lean hogs picked up nearly 3% today and are 6% off their lows from two days ago. An interim low is likely in place and clients should be in bullish plays as prices are back above the 20 day MA for the first time in two months. Live cattle are a buy and appear to be breaking out from their recent base. On confirmation which we should get in the coming sessions…add to longs. Gold and silver were marginally lower with gold down $6 and silver 15 cents as of this post. Our bearish bias still exists in gold while we play both the long and short side with clients that trade silver. We’re expecting gold to find its way back under $1520 and silver to trade under $36 in the coming sessions. Echoing yesterday’s trade above the 9 day at $37.15 or below the 20 day MA $36.05 should signal where from here.

Cocoa remain on our buy list and we still expect a correction in sugar but wait for signs of a reversal as we’ve already advised probing shorts and to date it has been a losing proposition. A near 25% appreciation in the last five weeks in our mind is not justified. Ag was higher ahead of tomorrow’s USDA report but we think the bullish news is priced in and unless we get a bullish surprise we would look for a trade lower. Some clients are short corn and long wheat into tomorrow’s number. Talk about a trend…the move higher in Treasuries has been relentless and we’re about to exit shorts at a loss which likely means we’re close to rolling over…stay tuned. For now clients are holding losers.

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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