MBWealth's Commodity Blog

Signs of an Interim top 3/10/10

MBradbard — Wed, 10 Mar 2010 20:38:32 +0000

We have a number of shorts on commodities thinking a setback is due. A failed rally…say it is not so! Crude looks to close higher on the day but below $82 and $1 off its high. We remain convinced a 5-7% correction is right around the corner. Forget the fundamentals and technicals; throw it all out the window and just recognize that even in a bull market it is healthy to get corrections. In the last 5 weeks Crude has moved almost 19% higher without any significant correction…it is time. Buying is starting to emerge in natural gas. We have been early to this trade but have held our guns thinking a short squeeze could lift April futures back over $5 in a hurry. Clients are long April futures and June $5/5.50 call spreads. As of this post we may have a double top at 1148 in the S&P we will see what happens in the next hour. If that is the case we would sell more futures with stops just above that level. Sugar lost an additional 3% today but at its low under 19 cents in May prices hit the trend line that has held in futures since the low in the fall of 2008 when prices were near 12 cents/lb. Clients have been scalping futures both long and short in futures because of the wild swings. Additionally they own May and July calls that are down significantly. Keep the faith just as quick as prices came down we could trade back to 26 cents in my opinion. May cotton lost for the third consecutive day trading to the 20 day MA. When that level gives way we should see a further 2-3 cent loss. Clients are positioned to take advantage of lower trade. Neutral reaction to the USDA report with soybeans and the products gaining and corn and wheat trading lower. Clients were advised to lift their May short futures in corn and hold their December longs. Now with the report behind us and being we filled the gap from last Friday we feel comfortable being net long. If we see cattle trade down again tomorrow we will re-explore getting clients short exposure with futures and futures spreads. Tug of war in the metals today with palladium, copper, gold and silver all losing over 1%. We are still thinking a trade lower in the short term is likely in both gold and silver. We expect to see April gold challenge $1080 in the coming sessions. As we’ve said in recent blogs $16.50 is the magic number in May silver. Depending on how the market responds to that level would dictate how we trade for clients. We will not take the signal but aggressive traders could short the Yen as long as we remain below 1.1125 in March. We are still looking for the Looine to trade below .9500 by this time next week…trade accordingly.

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

1 Year Later – Putting things into Perspective

admin — Wed, 10 Mar 2010 15:48:53 +0000

March 10, 2010
By: Matthew Bradbard

There has been so much fuss of late on the great performance in equities over the past year so we thought it would be interesting to put the indices head to head with the major commodities that we trade. Find the table below that shows the closing price on March 9, 2009 compared to the closing price of March 9, 2010. We use this date because that is the date the major US indices bottomed.

I find it comical that so many investors are ignoring the multiple long/short opportunities in commodities. I’ve seen commodities in my 10-yr career gain respect from the common investor but still too many traders fail to implement commodities into their portfolios.

Keep up to date on our daily blogs and weekly commentaries to see what commodities we are recommending selling and what commodities we are recommending buying.

To view the chart click here once you click scroll down

For detailed strategies contact us via e-mail www.mbwealth.com or telephone at (888) 920-9997 / 954-929-9898. For the most part investors reading this analysis want to be more hands on, however we suggest taking a look at our managed futures section and consider diversifying further via CTA’s with proven track records: MB Wealth Managed Futures

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

1 year later-Are we any better off? 3/9/10

MBradbard — Tue, 09 Mar 2010 20:42:28 +0000

1 year ago today equity markets bottomed and a vicious rally ensued but are we any better off than we were at that time? The lack of new buying above $80 hints of a correction to come. Yesterday we made a new high and failed and today we saw a lower high and lower low so I smell correction. Clients own $5 put spreads thinking a trade to $76/75 in the coming weeks. We hate to talk our position but we think natural gas is a BUY. Clients own a light long in April futures and June $5/5.50 call spreads. It is my opinion that this trade is too crowded for the shorts and if we do start to trade higher a short squeeze could happen. The NASDAQ intra-day was above the January highs but the S&P and Dow have yet to reach those extremes. The next few days will be critical to determine where we go from here. Our negative bias remains but as we said yesterday on a close above the January highs in the S&P we would suggest exiting short futures at a loss. CNBC talking about sugar heading lower to me means we are likely close to a turning point; prices in May were lower by 5.80% today. May cotton lost just over 2% today; clients are positioned short July via a fence expecting another 4-6 cents. Grains were lower ahead of the USDA report tomorrow. Clients are holding small option positions long corn, long soybean meal and short soybean oil. We advised clients long December corn futures to sell May against their December so they will be flat into the report. April gold traded down to the trend line that has held since the first week of February but I do not trust the action and think that we are headed even lower. I see support below today’s lows at $1098 followed by $1086. The trading range in May silver today was 55 cents and thought the action was impressive I still see a trade to $16.50 by mid month. We like the idea of having exposure short copper; depending on your risk tolerance would dictate how you attack it but we think a 10-20% correction could happen at any moment. The Euro and Pound continue to be the weak sisters in the currency market but the swings are too wild for me to be interested in trading. Our lone currency trade for clients is short the Loonie expecting a trade below .9500.

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

Correction Looming 3/8/10

MBradbard — Mon, 08 Mar 2010 20:23:22 +0000

That is not to say ALL commodities will correct but examining the technicals and digging deeper into the fundamentals we expect a “healthy” correction in a number of commodities. Those that have already come off the damage may have already been done (sugar, natural gas, cocoa, agriculture) but others look ripe for a correction. Where we see the chances of the largest potential corrections are Oil, metals, cotton, OJ, live stock and the Indices. Oil has been overbought for 2 weeks now but still prices have managed to gain $4 within that time frame. Clients are positioned in $5 put spreads and currently under water. We will not trade futures from either side until we get a clearer picture. Still trying to pick a bottom in natural gas thinking there is not much more downside. Being clients only hold a small position we’ve been able to weather the assault the last 2/3 weeks. Seven consecutive days in the stock market is very impressive but I’m a non-believer. I expect the January highs to act as stiff resistance; if prices get thru those levels unfortunately clients will be forced to cut losses on futures, regardless we will advise them to stay with their June ES and SP puts. Sugar was down by 2.6% but the 200 day MA is still serving as a magnet and as long as prices do not wander too far from that level we will hold onto May and July call options for clients. Without a bullish surprise in Wednesdays USDA report we think cotton needs to correct 5-8% immediately. Agriculture could be choppy in the next few sessions as traders position ahead of the USDA report. We will hold small longs in soybean meal, and corn and shorts in soybean oil into the report for clients. We cut losses in April live cattle futures for clients today as prices made new highs aided by fund buying. Our logic is the funds are in control and they have much deeper pockets than my clients so we will re-enter once a top looks like it is in place. We think it is very close but we are not willing to lose any more money. Aggressive traders could be short lean hogs with stops above last week’s highs. April gold was lower by just over 1% today but did remain above key moving averages. Clients own NO gold as we feel a trade under $1100 is likely this week. We have yet to determine an entry point for longs…stay tuned. Inside day in May silver as prices were lower by .80%. We think a trade down to $16.50 an ounce is likely within the next week. We will likely be a buyer for clients if we got that move so stay tuned here as well. We have little new to report in forex as the only open position for clients is shorts in the Loonie looking for a trade under .9500 in the March contract.

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

Protected: The Line in the Sand March 08, 2010

admin — Mon, 08 Mar 2010 15:09:17 +0000