Contrarian Ideas 6/10/10
Crude is back above $75 for the first time in 3 1/2 weeks advancing for the fourth consecutive session. On the highs prices got within 30 cents of our first target; again$76.60 and then $79 are our objectives. It is entirely possible we run into resistance just above today’s highs so if you have sizable positions lighten up or tighten stops. Natural gas tested the 38.2% Fibonacci level today but we still want to see more back and fill action before re-establishing longs for clients. Another 20 cents lower and we suggest working long September contracts. Can you say short squeeze? The S&P hit out first sell objective but we backed off and think there is more upside in the immediate future. The sentiment is so bearish we have decided to stay on the sidelines with clients thinking we can see a trade back over 1100…maybe 1125. The 200 day MA at 1100 and the 50 day at 1145 should serve as resistance. Sugar has gained 8% in the last 5 sessions; we expect another 5-8% before abandoning client’s current longs. Aggressive traders could short December futures in cotton with very tight stops. We prefer buying December put options with our clients. OJ and coffee were two markets I was waiting for lower ground but they look to be firming up so I will re-examine both commodities in the coming days…stay tuned. The Treasury complex appears to be rolling over as money finds its way back to risk assets. Clients are in NOB spreads; short 30-yr bonds and long 10-yr notes. As we said yesterday we expect 120/121 in September bonds. December live cattle remain on our buy list via futures and or options. Gold was lower today but held the 20 day MA and trend line. If flight to quality money leaves gold prices could get hit $35-50 ounce at a moments notice but we would buy the dip and advise commodity investors to have a portion of their accounts in either gold or silver. Silver fared better today gaining 10 cents. We suggest using $17.80 as support and $18.50 as resistance. Most clients are long in either futures or options expecting $19/ounce very soon. Did a USDA report actually help our clients yes it did happen today on bullish news on corn. Ending stock lower, ethanol usage higher, imports to China higher not to mention the weekly exports were supportive as well. Continue to buy September options or December futures assuming the low this week is an interim bottom. Of course this is an assumption not a certainty….time will tell. The dollar has lost ground for three sessions now and appears poised to break the 20 day MA for the first time since mid-April. We advised clients to exit their remaining Loonie longs and to place gtc profit orders on their Aussie longs. The Loonie is higher 1.23% and the Aussie 2.68% as of this post. The ECB and BoE kept rates as is which was no surprise. A new trade idea for clients today; they bought July put options in the Yen. Our logic is if the indices rally we should see the Yen break down less than 1.0800.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
Tags: australian dollar, BOE, bonds, bradbard, Canadian Dollar, commodity, corn, crude oil, ECB, euro, futures, gold, japanese yen, live cattle, MB Wealth, natural gas, options, S&P, silver, treasuries, USDA
