Beige book Disappoints 7/28/10
Regardless of the color of the book traders did not like what they saw. Crude traded below the 50 day MA but did manage a close above that level; in September at $76.30. We would be selling rallies if forced into the market still thinking there is more down side. By the conclusion of the week we would expect an attempt at $74 in the lead month. Natural gas appeared to break out to the upside today but before we get too excited understand yesterday was options expiration and today is the LTD for front month futures. Tomorrow’s action will be key to see follow thru and the AGA inventory report also comes out. We suggest purchasing October and November 50 cent call spreads. The stock market did not like the Beige book and could be rolling over from here. Clients exited their August 1150 ES calls and bought back their September 1000 ES puts today at just better than 6 point ($300/per). This leaves them long September 1075 ES puts with a target of 1025 on the futures. If we roll over from here we will be looking to scale into shorts in various indices for clients with stops above the recent highs. December cotton has completed a 61.8% Fibonacci retracement trading briefly above 77 cents today. Aggressive traders are advised to scale into short futures and to buy December put options. On a leg lower we could see a trade to the low 70′s in my opinion. If December coffee fails to breach $1.70 this week we will be looking for short exposure with clients…stay tuned. We’re perplexed in the Treasury complex and have our hands full with the indices and currencies so we will stand aside until we get a clearer picture. Clients were advised to cover their hedges in live cattle liquidating their August puts at a $50 loss including fees. They now hold December longs expecting higher trade. August gold held today gaining slightly. This was quite impressive considering yesterdays action. To me gold is currently a crap shoot so I have no suggestions. Silver traded to a seven week low but pared its losses closing 20 cents/ounce off its lows. If silver finds a bottom in the coming sessions we will most likely advise clients to buy back their top leg in their December call spreads. Aggressive traders should have scaled down their September futures longs and could take more heat but a trade lower than $17 in our opinion would be short lived. Copper is above the 100 day MA for the first time in 2 1/2 month and if this is not a one off event this would be a new development. Pay attention in the coming sessions! Weather in Russia has the wheat market and entire grain complex back in bull mode. We may have to revise our buy objective in corn, soybeans and soy meal higher…stay tuned. Our top pick in this sector remains a buy in December corn; with an upside objective of $4.40/bushell. Some clients remain short the Euro and Swissie looking for lower ground. Again our targets remain $1.25 and .9200 in September futures. We think it could be possible to see a short squeeze in the dollar on month end which in theory could cause weakness in other crosses in the coming sessions.
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, cotton, crude oil, currencies, dollar, energies, futures, gold, grains, live cattle, livestock, matthew bradbard, MB Wealth, natural gas, options, S&P, silver, soybeans, treasuries, wheat
