MBWealth's Commodity Blog » Daily Thought

Goodbye July 7/30/10

Matthew Bradbard — Fri, 30 Jul 2010 19:46:10 +0000

Based on the last two day’s action Crude oil appears to be making attempts at higher ground. We will be late to this move because I do not trust it and need further confirmation before getting bullish exposure for clients. A settlement above $79.50 would be the first hurdle. Natural gas will close 8% higher this week at a fresh one month high. We’re suggesting trailing stops on futures just below the 50 day MA and to purchase October and November 50 cent call spreads. The Dow bounced off the 200 day MA at 10275 and could revisit the week’s highs early next week closer to 10550. We would still suggest selling rallies thinking a weak jobs number next week could be the nail in the coffin for the bulls. Likewise the S&P pared losses today but as long as prices settle below 1104; the 200 day MA we think it remains a sell rallies market. For now clients will be fading rallies and purchasing September puts in the ES. December cotton closed 2.41% higher today breaking to the upside; futures traders should take losses on a trade above 80 cents. Yes we’re bucking the recent trend but we like December puts thinking a trade down to the low 70′s is likely. Lumber seems to have found some support between $200-205; as we’ve voiced in recent weeks we expect a jump to $240 in the November contract. December live cattle held the 20 day MA after multiple attempts re-gaining much of yesterday’s losses today. We want to be a buyer on a set back with clients closer to 93/94 cents. December gold gained 1.14% today lifting prices to the 100 day MA at the high of the day. Seasonally we are heading into a bullish part of the year for gold but we will wait for further evidence before re-committing capital for clients. Consecutive settlements above $1187 would get us interested in gaining long exposure…stay tuned. September silver was higher by 2.37% today lifting prices back over $18/ounce. Brave traders have remained long and should continue to trail stops on their futures. We also suggest buying December call spreads as a settlement over $18.25 next week should mean an attempt at $19.50. Buy agriculture before the 8/12 USDA report. Contact us for more details or subscribe to our weekly commentary for precise trading ideas. We’re interested in having client’s long corn, soybeans, soy meal and today started buying KCBOT/CBOT wheat spreads. Clients took a partial loss on their Swissie futures overnight. Most still are short but have reduced their trade size in half. Options traders remain short the Euro and Swissie looking for some reprieve next week. With the Central banks on a new monthly calendar we expect European currencies to depreciate…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.

Deflation Curveball 7/29/10

Matthew Bradbard — Thu, 29 Jul 2010 20:02:56 +0000

Crude recovered the two previous day’s losses gaining 1.8% today. We expected to see the 50 day MA give way and prices to trade lower, we were wrong. We would move to the sidelines until Crude gives a clearer signal on direction. We expect a trade above $79.50 to signal higher ground and a trade below the 50 day MA at $76.35 to signal lower ground. Natural gas is higher by 2.44% as of this post having gained all four sessions this week. For futures traders as long as the 50 day MA holds on a closing basis we would remain long. For option traders we like purchasing 50 cent October and November call spreads. We would think after a 50% Fibonacci retracement and a failure to remain above the 200 day MA indices are headed south again. Whether it be talk of deflation, a disappointing jobs number or lack luster earnings a move below the 50 day into next week; at 1077 in the S&P confirms lower action. Aggressive traders could short indiceswith stops above the recent highs. The action is sugar has been remarkable with prices closing at 3 1/2 month highs today lifting prices 40% off their lows from May. I admit we left longs way too early for clients; sometimes playing it safe costs you money but in the long run playing it safe keeps you out of trouble. Higher trade was rejected again today in December cotton; we feel prices could move south and advise a sale above 77 in futures and purchasing December put options. Coffee had its highest close of the year today so we are no longer interested in purchasing December puts for clients. We advised clients to cut losses on their December live cattle today; losing $220/per including fees. Inside day in September silver today with prices failing to get above the 200 day MA. On the week prices are down 2.7%, we would like to see a recovery tomorrow and a close back above the 200 day MA at $17.73. Aggressive traders are scaling into longs in September futures and purchasing December call spreads. I’m a little confused about the deflation comments with copper gaining over 3% this week back near $3.30? Agriculture remains a buy dips across the sector as we continue to recommend a bullish position into the August 12th USDA report. Our suggestions remains long December corn, November soybeans , December soy meal and we may try again to buy the December KCBOT/CBOT wheat spread at even money for clients. It was a painful day for our currency traders today as the dollar slide had all crosses higher. They remain short the Euro and Swissie but on a higher trade especially in the Swissie we may be forced to cut losses. Overnight action into tomorrow will be key.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Beige book Disappoints 7/28/10

Matthew Bradbard — Wed, 28 Jul 2010 20:14:31 +0000

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.

Weakness in Commodities 7/27/10

Matthew Bradbard — Tue, 27 Jul 2010 20:02:38 +0000

Weakness in commodities what to do? Here are a few ideas…get short, exit longs or be prepared to buy from lower levels. We think Crude oil and the distillates have put an interim top and expect prices to fall back. We reserve the right to change our mind if September closes above $79.50. We expect a $3 pullback in Crude and 10-15 cents in the distillates and then we would re-evaluate where from there. Exit ALL remaining longs. In terms of an allocation in this sector we prefer bullish exposure in natural gas via October and November 50 cent call spreads. As of the action today prices appear to be breaking the down sloping trend line previously mentioned. The next hurdle will be a settlement above the 50 day MA; at $4.57 in September. As of this post indices are slightly higher but the bulls seem to be running out of gas. On a further appreciation of 1.5-2.5% clients will exit their August ES 1150 calls and buy back their September ES 1000 puts. We cannot rule out a probe of 1130/1135 but we do not feel those levels are sustainable. Was a top made in sugar today? We’ve been calling a top for the last week and exited clients long perhaps a little premature. Prices in October closed 3.4% off their highs today. If this is the start of a correction we think a trade back to 16/16.50 happens quickly. Treasuries broke their 20 day MA with 30-yr bonds and 10-yr notes destined for lower ground. IF we can turn a profit on our clients Euro and Swissie shorts we would like to be in NOB spreads expecting September 30-yr bonds to track back to 122/123. Metal traders fled for the exit doors today with August gold breaking nearly 2% dragging prices to three month lows. We think the 200 day MA will be in play in the coming sessions at $1147. How prices respond there will determine movement in the next two weeks. Clients would be content buying from lower levels. September silver was lower by 4% today; we would exit futures and/or tighten stops as a close below the 200 day MA may mean lower ground. Traders holding December call spreads are losing money but once this correction concludes we may buy back their top legs. Nothing has changed with our year end target as we still anticipate a trade to $20/21 ounce. Copper failed again to take out the 100 day MA; if prices fade from here then prices should head south. If corn trades 2-3% lower in the remainder of the week we suggest buying December and covering all remaining shorts in September. Additionally we still feel November soybeans and December soy meal are buys but from lower ground; $9.40 and $270 respectively. Some clients remain short the Euro which is unchanged as of this post and short the Swissie which is down by just over 1%. Our targets remain $1.25 and .9200. If energies and metals continue to depreciate we may have some bearish suggestions in the Loonie. A failed rally today has prices looking like we could get a correction back to .9400.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Time to make a Decision 7/26/10

Matthew Bradbard — Mon, 26 Jul 2010 20:13:05 +0000

The direction the markets move this week will likely determine where prices go the next several months. We suggest booking profits on longs in Crude thinking we could get a set back. We would rather be on the sidelines wanting in the market than in the market wishing clients were on the sidelines. Prices are getting over bought and have failed to make it to higher ground in recent sessions. We’re expecting natural gas to break above the down sloping trend line that has capped rallies since mid-June. Continue to buy October and November 50 cent call spreads. The S&P penetrated the 200 day MA today for the first time since mid-June but before you get too bullish we feel this move is in it’s eight inning. We see resistance at 1111 followed by 1134 in the September S&P futures. Clients will continue to scale into shorts that hold those resistance levels. Additionally on a trade higher clients will liquidate their August 1150 calls and buy back their September 1000 puts. This should leave them with a realized profit on those two legs and long a September 1075 put holding for the next leg down. Sugar managed another positive day today gaining nearly 2%. We expect a correction to the magnitude of 10% any day now. December cotton pushed thru the 100 day MA having gained nearly 5% in the last four sessions. Clients will be looking to short futures from higher levels and to establish bearish option strategies…stay tuned. Both 30-yr bonds and 10-yr notes violated their 20 day MA’s but managed a close just above that level. We are looking to sell weakness via NOB spreads for clients but have not made a move just yet. Live cattle were lower by nearly 1% today. Clients will be looking to exit their August puts on a move closer to 91 in the coming days. They will remain long their December thinking this retracement is temporary. Based on the recent action if the pattern holds expect October lean hogs to grind lower to 74 cents this week. In late dealings gold appears to be breaking the 100 day MA. We could see sellers try to take prices back to the 20 day MA; in August at $1147. Clients have NO exposure in either direction. September silver was positive closing above the 100 day MA but the real test this week is if we can get above the 50 day MA; a level that has capped all rallies in the last three weeks. We suggest remaining long September futures as long as $17.70 holds and have most clients long via options in December expecting higher ground. Copper made it its sixth consecutive positive session trading above the 100 day MA for the first time in nearly three months. This should not be ignored and if this level holds we may need to re-evaluate some of our other positions. December corn was down again today closing below the 100 day MA for the first time in three weeks. We see support between $3.68-3.75 and will likely start getting clients long again this week. Additionally a move slightly lower would allow clients to lift their shorts in September unscathed. Soybeans and soy meal were also lower but clients are looking for lower pricing before re-committing capital…see previous posts. The US dollar lost ground today dragging prices to fresh three month lows. Clients remain short the Euro and Swissie thinking that last weeks resistance level will hold. Again our targets are $1.25 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.