On a Dollar Retracement

I’m not a dollar BEAR but if we get a trade back to 75.00 in the dollar index we could see a nice pop in the commodity complex. Bullish engulfing candle on the daily bar chart in Crude with prices 1.75% higher as of this post. Clients are advised to be cautiously long but we would like to see a settlement above $98 to be confident we will continue north…stay tuned. The distillates did not aid in the move as they were flat with RBOB slightly higher and heating oil slightly lower. For the last three sessions natural gas futures have made higher highs and higher lows but the advance in total has only been 15 cents in August. Remain patient though as a move to $4.55/4.60 could come in short order. Our advice is bullish exposure in September contracts.
As of this post stocks have pared losses but still remain down 0.50 -0 1.0% today. Use the 50 day and 100 day MA’s as your pivot points. In the S&P at 1308 and in the Dow between 12200 and 12275. Our clients who were short were advised to lighten up or exit as we view being long select commodities a better play then shorts stocks at this juncture. The dollar should finish flat today but based on the chart pattern it appears the failed spike higher was likely due to the running of stops. Without a close above 76.75 in the next few sessions we would expect a move back towards 75.00…stay tuned. We still like buying dips in the Yen as we see little upside resistance. In the last three sessions September futures have advanced 2.3% or roughly $3,500/contract.
Aggressive clients can gain bearish exposure in live cattle again. We expect a 2.5% break and have structured bearish options and futures plays for some of our clients in October contracts…trade accordingly. Gold picked up 1.3% as of this post advancing to a three month high on the verge of a record high which we expect by the weekend. Momentum traders will likely be buyers on a new high which could lift futures near $1600/ounce which would serve as an exit door for our clients current positions. Silver picked up 1.15% but we would like to see prices take out the 50 day MA at $36.25. Some clients remain long September and December still thinking we will get a trade back near $38/ounce.
Sugar picked up 5.4% today…OUCH for our shorts. We remain stubbornly long but as I’ve said numerous times sometimes the biggest trades are the toughest and this one has been brutal. Fortunately most clients with bearish sugar plays have profitable trades in other trades. Yes we will be selling cotton and coffee for clients even though they are down big because we expect more weakness. To help put things in perspective do not look just at the last few month but look at weekly and monthly charting. Grains remain in buy mode as those vigilant traders that weathered the mass exodus from funds in recent weeks should finally get some vindication. Corn picked up nearly 4% today, soybeans 0.84% and wheat just over 5%. Wheat declined the most so it may have the most to make up in the coming weeks FYI. Stand clear of Treasuries for the time being…in my opinion.
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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