A Trendless Market

Markets remain choppy and sloppy as investors should be picking their points and trading from both sides of the market in most commodities. For the last five sessions Crude oil futures have made higher highs and higher lows. We expect price to push through $100/barrel next week and make their way to higher ground. $103.30 is a 50% Fibonacci retracement and seems like a reasonable target. Natural gas is just over 20 cents from their highs but we expect more downside before we would be willing to buy…say a trade near $4.20/BTU in September. Stocks should end slightly lower today but higher on the week. Both the Dow and S&P are getting close to their contract highs in early May…from here we see limited upside but we have NO current exposure with clients.
Gold ended higher by just under 1% today and as of this post is trading at $1600/ounce. We feel prices are due for a setback but one has to be impressed with the fact that futures held onto the $1600 level. We anticipate a trade back near $1550 but at this moment we cannot rule out $1650 first so not the best risk/reward. Silver picked up 3% today trading back above $40/ounce. For five days we’ve been in a $2 trading range and we favor a break but we’re likely talking our clients positions. Aggressive clients are holding losing trades positioned short with a expected trade under $38 next week…trade accordingly. The dollar index gave up nearly 1.5% this week but we feel most of the damage is done and we would not rule out a dead cat bounce next week.
Our favored plays remain shorts in the Swissie and Loonie. Forced to pick one we like the Loonie as we may have established an interim top in yesterday’s trade. Fade rallies in cocoa and buy dips in cotton. We will have more specifics early next week. As for sugar some clients remain in their bearish trades in both futures and options but this has been brutal as sugar surged 5% today to new contract highs. Fortunately most clients hold winning trades in other commodities because this trade has not been kind to our bearish trades…stay tuned. Both 30-yr bonds and 10-yr notes bounced off their 20 day MA’s…talk about line in the sand. Until that level breaks we would stand clear.
Euro-dollars remain a sell as they are trading just off their contract highs at extremely over bought levels…in my opinion. Agriculture ended the week slightly higher but we still would prefer buying a break ahead of the next USDA report. At the moment the day to day is largely effected by the weather which was mixed this week. Sometimes it is not the money you make but rather the money you do not lose. For example; clients were advised to take a small profit on their lean hog shorts yesterday and the next day prices pushed nearly 3% higher. Being the 50 day MA held the last three days in October live cattle and prices are over sold we advised clients to start scaling into longs today. This was a bold move ahead of the cattle on feed report but with no real surprises we should trade north from here. A trade back to the 20 day MA would be a gain of 2.25%.
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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