Is my Money Safe in Commodities

That is a loaded question because investing in commodities is not safe however if a clearing firm goes out of business and you have a futures account the answer is yes. With the passing of MF Global I was asked this question a number of times today so I wanted to put all prospective commodity clients at ease. Let me be clear trading commodities is not safe but money at an FCM in segregated account…that my friends is safe.

Crude oil continues to exhibit signs of an interim top trading down 0.90% as of this post. On the December contract we see solid resistance at the $94/barrel level and we continue to operate under the influence that we see prices closer to $87 in the very near future…trade accordingly. Natural gas has closed positive the last two sessions lifting prices over the down sloping trend line mentioned in previous blogs. Aggressive traders can start gaining bullish exposure in January contracts. Stocks may have sucked longs in with the over extension last week but a correction appears to be under way. A breach of the 9 day MA’s just below today’s lows should confirm an interim top. If we see further downside momentum look for the Dow to find its way quickly to 11300 and the S&P to 1185…trade accordingly.

Traders that were long gold or silver were advised to offset their positions today and move to the sidelines. December gold is having trouble getting through $1750 to the upside and on the downside a break of $1700 should lead to a retest of $1650. Silver is back under the 40 day MA losing nearly 4% today. Longer term we are extremely bullish but from here we feel a trade back to $32.50/33.00 is in the cards…trade accordingly. The dollar recouped 2% today with all crosses getting hit largely influenced by outside markets and the BOJ intervention. We got the move we’ve been forecasting in the Yen with three months of up movement erased in one session but look for a further sell off in the session to come. With the increased volatility our suggestion is purchasing options as opposed to futures.

Continue to fade any rallies in sugar and coffee. Coffee is on the verge of making fresh 2011 contract lows and sugar should see an additional 5-8% downside. With the MF Global turmoil and liquidation in commodities and equities money flowed back into Treasuries with 30-yr bonds and 10-yr notes gaining traction closing back over the 20 day MA. Look for further easing in other markets to help lift Treasuries further…trade accordingly. Forced into the market we would rather be short than long in the Ag sector but at the moment have advised clients to move to the sidelines. Exit all remaining live cattle shorts as prices are approaching a value zone in our eyes. We will likely be a buyer of 2012 contracts this week for clients if prices stabilize…stay tuned.

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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