Stocks lead Commodities follow 7/23/10
From my perspective indices are in the driver’s seat and commodities are looking for guidance. Crude is set to finish the week higher by about $3 closing out near a three week high. We assume that if the bulls in the stock market can push or even hold indices at current levels prices could test the 100 day MA just below $81. Prices have not been above the 100 day MA since the beginning of May when we were at $83 so this would be confirmation that higher prices are around the corner if accomplished. We are mildly bullish but if forced to pick between oil or natural gas we would prefer bullish exposure in natural gas. Clients continue to be advised to purchase October 50 cent call spreads. As of this post the S&P is just below the 1100 psychological level and the 200 day MA at 1104. We do expect prices to roll over in the coming weeks but a probe of the 50% Fibonacci level at 1111 or even a 61.8% retracement to 1134 is not out of the question. Remember our previous trade recommendation; on a move near 1125 we would advise clients to exit their August 1150 calls and to use that premium to buy back their September 1000 puts. We did not think sugar had this much upside but we’ve now completed a 50% Fibonacci retracement on today’s action. I know it is a broken record but we expect a pull back as prices have appreciated near 28% in the last six weeks. With coffee prices higher into early next week we may opt to gain bearish exposure in December with clients. Lumber is back above the 20 day MA; we expect a 15-20% bounce from here. Treasuries look toppy but not until we get consecutive settlements below the 20 day MA’s we would be willing to get short with clients. That level is 127’6 in 30-yr bonds and 122’17 in 10-yr notes. Cattle on feed report appears to be neutral at first glance; we will see Monday morning how the market reacts. Clients that are long December purchased August putsand will react early next week depending on the price action. Longer term we are bullish but after an 8% appreciation we feel a correction is likely. August gold was unable to hold $1200 after early trade and closed back just above the 100 day MA remaining in the $20 range that contained prices much of the week. As we said yesterday trade the break out above $1200 or below $1180. After trading near six week lows early in the week September silver managed to recover closing back above the 100 day MA and higher on the week. We see mild support at $17.80 with more significant support at $17.40. We suggest a light long futures position in September and December call spreads. Corn is nearly 7% off its high last week but we feel there is more downside before we are willing to lift hedges and gain length for clients. The 100 day MA in December comes in about a nickel below today’s close and a move back to the trend line drags prices closer to $3.70. We will continue to be a buyer for clients in corn, soybeans and soy meal from lower levels. As long as 82.25 holds in the September dollar index we should get a bounce from here. Some clients are positioned to take advantage of lower trade in the Euro and Swissie which both appear to be rolling over. Our targets are 1.2450 and .9200 respectively.
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: bradbard, calls, coffee, commodities, corn, crude oil, dollar, energies, futures, gold, grains, live cattle, livestock, matthew bradbard, MB Wealth, natural gas, S&P, silver, soybeans, stock market, sugar, treasuries, wheat
