MBWealth's Commodity Blog

Upbeat Expectations 2/3/12

Matthew Bradbard — Fri, 03 Feb 2012 22:32:17 +0000

A positive jobs number and things heating up in Iran and Crude is back on the move advancing 1.5% today. We may see a bounce but until we see a trade back over $99 I still am thinking prices have more downward pressure. My target in March is a trade closer to $93-94 in the coming weeks. What is disturbing though is the disparity between the Crude daily chart and the distillates as Crude is on the lower end of the recent trading range while heating oil and RBOB are breaking out to new highs. It is a classic case of the tail wagging the dog. My sense is all products should trade lower in the coming weeks but time will tell. Natural gas is cheap but with the absence of two major events; either extremely cold weather or a significant shut in on production there is no catalyst for prices to move higher…look elsewhere. Job growth and lower unemployment rate had stocks off to the races with equities at fresh 2012 highs up near 5% ytd. Stocks will likely forge their way to higher territory as I am back in the camp as being long makes sense as long as the 9 day MA holds. That pivot point comes in the S&P at 1318 and in the Dow 12655. Gold and silver in my estimation made an interim top this week and we should see correction in the short run. Gold lost 1.8% with the June contract giving back most of the week’s gains today. I would expect a further $50-75 correction in the weeks to come. A 50% Fibonacci retracement from the current leg puts prices back at $1650. Silver was able to hold on to most of the week’s gains but still registered a 1.6% loss today. A correction here would likely drag March futures back near $31/ounce. Nothing new to report in forex as I am still expecting a bounce in the dollar and for the other crosses to back off. In full disclosure I have no recommended plays until we find a top in foreign currencies. OJ continues to slide as prices have lost ground eight of the last nine sessions…expect that to continue. I like the move in cocoa bouncing off the 50 day MA but the inverse relationship it generally exhibits to the dollar has me holding off on new purchases but have this commodity on your radar in case the dollar moves south as opposed to north as I expect. Base on the Market’s assumption that sometime in the next year we may see rates increase Treasuries got hit hard today with 30-yr bonds depreciating 1.5%. Aggressive traders can fade rallies in 30-yr bonds and 10-yr notes with stops just above their 20 day MA’s. Those levels are 143’11 and 131’06 respectively in the March contracts. Today in the AG music chairs market corn and wheat was flight while soybeans advanced 1.27%. We could see prices grind higher but I prefer to be on the sidelines with customers if and when they get stopped out of their longs that they should be trailing. A leg lower could be bought but I would like to see a correction before initiating new positions. Expect further downside in live cattle as today prices gave up 1.2%. A 50% Fibonacci retracement in April puts prices to 125.70 while 61.8% drags prices to 124.75. Lean hogs are a buy on dips that hold the 20 day MA; in April at 88.35.

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

Prepare for NFP 2/2/12

Matthew Bradbard — Thu, 02 Feb 2012 21:55:59 +0000

I think the number is fabricated but nonetheless it is market mover so prepare for tomorrow’s jobs number. As of this post Crude is lower by 1% about in the middle of today’s range trading lower for the seventh consecutive day. I think we see an additional $3-4 retracement before we run into serious support. If that assumption is correct expect heating oil and RBOB to lose 10-15 cents. Hello volatility…with 7% moves on a daily basis up and down I no longer have the stomach for natural gas. Support is seen at $2.35 with resistance at $2.75 for those braver than me good luck. Equities are back above their 9 day MA’s but I would suggest the sidelines into tomorrow’s jobs number. Gold moved higher to confirm that the upward leg likely has further life in it. Next resistance is seen between $1805-1810 but I smell a correction so have advised clients to tighten stops and lighten up on longs. Silver penetrated the key$34 level today gaining 1.5%. We could see prices drift as high as $36 but I would pare position size down because we are due for a correction. Copper lead the metals higher and if you notice prices have started to roll over in recent dealings so gold and silver should follow suit very soon in my opinion. Inside day in the dollar index as prices failed to make a new low. If we hold 79.00 into the weekend aggressive traders could be buyers trying to capitalize on a dead cat bounce. Other crosses appear to be overbought and due for a correction but I would wait for signs of a top as opposed to picking a top as that has cost my followers a few dollars on recent recommendations. OJ traded below $2 but managed to push back above that level by settlement. We continue to see more downside in the weeks to come…trade accordingly. Grains are starting to show signs of exhaustion as corn and soybeans could not hold onto gains and wheat lost 1.7% today. $6.73 is the 38.2% Fibonacci retracement level and we need to get through that level in the next few sessions to see higher ground. On a correction prices would likely fall to $6.30 and on a trade higher the next resistance is at $7.00-7.05 in March. Wait for a trade closer to $1.29 in April live cattle before re-establishing longs. Lean hogs lost ground for the first time in five sessions but in my opinion we still have significantly more upside…scale into longs with a target of 95.00 in April.

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

Not the End 2/1/12

Matthew Bradbard — Wed, 01 Feb 2012 21:22:17 +0000

With a more positive outlook domestically and abroad expect commodities that had previously factored in a more dire picture to get back losses from late 2011. Today makes it five days in row with Crude down just over 1% as of this post trading at six week lows. A close below $98.30 in March should signal lower ground. $99 should cap further upside and I could see prices drifting back under $94 in the coming weeks. Both RBOB and heating oil are having trouble keeping their heads above water as well. If Crude turns south as I expect do not rule out a 15 cent correction on the distillates. To clarify if there is confusion when natural gas broke the 9 day MA we advised moving back to the sidelines to exit long exposure. Depending on your order entry would dictate if this was a slight profit or a slight loss. There is no doubt longs over the last few months on the whole have been a losing proposition…the good news is our clients and hopefully followers trade more than one market and can use my advice to offset their natural gas losses in other commodities. Stocks are having trouble breaking the 20 day MA on the downside as that level has supported for the last three sessions. In fact after the 1% plus surge today domestically prices are back above the 9 day MA. My suggestion is wait for the NFP number this week to get re-positioned long or short. My gut tells me that if by week’s end we do not see new high expect a 4-6% correction in the coming weeks. Gold finally reached our target trading above $1750/ounce for the first time since early December. Past performance in not indicative of future results but the last time gold was around these levels we experienced a rather nasty $200 sell off so although bulls remain in the driver’s seat have an exit strategy in place. I ultimately see $1850-1900/ounce in the coming months but I expect a correction first…trade accordingly. Silver continues to but its head against the $34 level but we need to see that level penetrated very soon or a correction will likely commence. A trade above $34 would lift prices to the next resistance at $35.50 while a correction south would take silver back near $30.50-31. I still think the 79.00 level holds in the dollar index and we experience a dead cat bounce from here. The Euro could be sold with tight stops but I would hold off trying to pick tops in other crosses as they continue to inch higher. Traders of late should have been stopped at a small loss trying to scale into shorts based on my trade recommendations. Cocoa and sugar broke their 50 day MA’s today and it appears cotton will by week’s end. I continue to advise fading rallies in these three soft commodities. OJ lost 5% today and should be headed back under $2/lb in the coming sessions. I am expecting a violent 10% correction…trade accordingly. Treasuries had their first negative day in six sessions. Likely fast money taking some risk off ahead of Friday’s NFP. Corn and soybeans have tread water for the last month getting back their December losses in January but the standout of late has been wheat. Gaining 1.25% today and advancing to eleven week highs. I see the next resistance on the March contract between $7.15-7.25. The 20 day MA in lean hogs are acting as a magnet for prices. I suggest buying a dip and have no client positions currently. April live cattle were higher by 1.75% today trading to seven week highs. I remain bullish and believe this leg can carry prices to contract highs in the coming weeks…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.

The January Effect 1/31/12

Matthew Bradbard — Tue, 31 Jan 2012 20:46:36 +0000

With one month under our belt how is your 2012 looking? RBOB, OJ, stocks, feeder cattle and all the metals were the upside movers in the month of January while natural gas was the only negative standout. Will these moves set the tone for trading in 2012? The move lower has been minor but Crude has closed lower for the last four sessions. Today a $3 rally was rejected as prices will close just above $98 the lowest close in one week. I continue to get mixed signals and would suggest waiting for further evidence before making a move. A number of followers preach about activity in Iran and the Middle East…well guess what folks it’s called futures for a reason all of that is factored into the current price. Do not be so sure oil will appreciate in the immediate future. The distillates are holding onto slight gains as of this post and as long as prices remain above their 9 day MA’s a slight edge is given to the bulls. Those levels in the March contract are 2.8430 in RBOB and 3.0275 in heating oil. Natural gas was slaughtered today losing almost 8% closing back under the 9 day MA. Now that this level has given way do not rule out a test of the recent lows…trade accordingly. Equities are unchanged as of this post. I see the 9 day MA as resistance and the 20 day MA as support. Those pivot points are as follows: in the S&P 1295 and 1312 and in the Dow 12495 and 12630. Gold will not have its highest close but it did have its highest trade in seven weeks getting within $2.50 of our $1750 target. A positive development but do not rule out a setback. Solid support is not seen for about $45 below the current market level so risk management on longs is critical. Silver will close marginally lower for the second day in a row but still held the $33 level. As I said yesterday unless we see a settlement above $34 very soon I would expect a correction back under $31/ounce. On the most recent leg higher a 50% Fibonacci retracement would put prices back at $30/ounce. Trade below 79.00 continues to be rejected in the dollar index. Expect a give back in the Euro and commodity currencies on further dollar appreciation. The Loonie appears to be the weakest link but much of its movement will be governed by the movement in metals and energies so look for those sectors for guidance. Sugar and cotton remain sales on any advances. My targets in sugar and cotton are 5-7% lower in the next few weeks…trade accordingly. 10-yr notes continue their advance to fresh contract highs while 30-yr bonds should be making new contract highs in the next few session as bulls remain in the driver’s seat. From my perspective 2013 Euro-dollars look poised to trade above their late Summer highs so I would hold off on fresh bearish entries. Lower trade in Ag was short lived as we see all green on the screen today with corn and soybeans slightly better than 1% and wheat higher by over 3% lifting prices back near their January highs. Continue to trail stops on any remaining longs. We advised exiting longs on a breach of the 20 day MA in both lean hogs and live cattle which happened in the last few session. Now it appears we may be trading higher so on pullbacks look to re-establish longs placing stops back under the 20 day MA again. The chart looks favorable in hogs so I would allocate there if I had to chose one.

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

If Equities Fall 1/30/12

Matthew Bradbard — Mon, 30 Jan 2012 21:31:36 +0000

Over the next few sessions we will know but we may see some gains given back in equities as minor chart damage is being done. That being said expect higher trade in Treasuries and commodities on a stock retraction. Crude continues to flirt with $100 unable to pick a direction. The longer this consolidation pattern continues the larger the breakout the tough part is determining what direction will prices breakout. A settlement above $100.50 or below $98 would likely signal the direction but until then who knows? Natural gas failed to hold onto early gains trading down 3.4% as of this post. As long as the 9 day MA holds on a closing basis at $2.59 in March I’m assuming the bottom is in. Equities have not given up much ground but prices have lost ground now for the last three sessions and today could be the first settlement below the 9 day MA. If that happens expect the 20 day to support and then the 50 day MA. Those levels are 1293 followed by 1250 in the S&P and 12470 followed by 12090 in the Dow…trade accordingly. Gold failed to trade higher today but I am still eying the 61.8% Fibonacci level at $1750 in February. Considering the run we’ve seen of late I would not be adding new positions at this level but rather be looking for an exit door. Those still long are encouraged to trail stops. March silver is having trouble holding above $33.75 as that level has been rejected the last three sessions. Momentum remains with the bulls but without a settlement above $34 very soon I would expect a $2.50-4.00 correction. The dollar dug in its heels today gaining for the first time in four sessions. If the 79.00 level can hold in March for the next few trading days we may get a dead cat bounce. I would expect all buying to be rejected between 80.25-80.50 if we can even muster that much. Aggressive traders can sell the commodity currencies with stops above the recent highs…this is a good risk to reward trade. Cocoa got within $10 of the 100 day MA but failed to reach our target. From here it looks like lower trade which would be confirmed on a trade below the 50 day MA; in March at 2255. Cotton looks destined for lower ground as well…this too would be confirmed on a trade below the 50 day MA; in March at 92.75. Treasuries gained for the fourth consecutive session and do not appear to be done on this leg. We’ve already seen new contract highs in 10yr notes and we could be headed for fresh highs in 30-yr bonds…trade accordingly. Ags traded lower today with soybeans the biggest loser at a 2.77% loss. Those that are long corn or wheat could tighten up stops as we may experience a bit of a give back. A trade under the 20 day MA’s in both lean hogs and live cattle should have traders back on the sidelines.

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 January 30, 2012

Matthew Bradbard — Sun, 29 Jan 2012 17:30:41 +0000

More Quantitative Easing 1/26/12

Matthew Bradbard — Thu, 26 Jan 2012 21:17:59 +0000

With the Fed hinting at more quantitative easing do not expect commodities to get inexpensive any time soon. Crude oil has made a higher high now for the last three sessions and on a close back above $100 traders could start scaling back into longs. I see support at $99 followed by $97 in March contracts. Natural gas did trade lower today but if you notice the 9 day MA is holding as support. Traders can scale into longs with stops just below that level. It comes in at $2.56 in March. Stocks will close slightly lower today, only the second negative close in the last fourteen trading sessions. The low was the 9 day MA which continues to serve as the pivot point. On a breach offset all longs. Gold is trading $25 above its 100 day MA and on its way to $1750 on the February contract in my opinion…trade accordingly. Silver closed above the 100 day MA for the second day in a row and though prices could get near $35 I think we are due for a $2.50-4.00 correction very soon…trade accordingly. The dollar lost ground today though it pared losses closing 35 point off its lows. My opinion is lower ground still which means higher trade in other crosses. Just keep stops tight as markets are starting to become overbought on daily and hourly charts. Cocoa quietly advanced another 1% today making its way towards its 100 day MA. The highs are likely in on OJ so buying out of the money puts may be a good play thinking we get some retracement off the record highs seen earlier this week. Euro-dollars continue to stair step higher…hold off on short entries but I got to tell you 0.60% at the end of 2013 seems like a good play so we will be giving sell signals…stay tuned. Wheat picked up nearly 2% while corn remained flat. Continue to scale into longs trailing stops. Again I feel we could see March corn above $7 and wheat closer to $7.50 in coming weeks. Exit remaining live cattle longs I am betting an interim tops was made in recent sessions. Traders should have been stopped out of longs in lean hogs at a profit as prices broke the 20 day MA today.

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

Taking a Breath 1/25/12

Matthew Bradbard — Wed, 25 Jan 2012 20:46:01 +0000

I misread the recent action thinking we were approaching a turning point but now it appear the markets were just taking a breath and now the underlying moves are back on track….trade accordingly. Crude appears to be finding its footing as further sales are being rejected. With a settlement back above $100 I would become more friendly. On a close above $102 in March I then would be looking for buying opportunities thinking we get a new high…trade accordingly. I say a bottom is in on natural gas and aggressive traders can be long. On a false start I would not hold it back to the bottom but a stop just below the 9 day MA would be my suggestion. Prices have already jumped 23% off their lows. In the coming weeks I could see a further 50-75 cent appreciation. Can you say short squeeze? The 9 day MA supported a trade lower in the morning only to end at fresh highs …well as of this post. I remain impressed but I still think we see an interim high very soon so I would start trimming your positions. I am not getting bearish just advising booking profits on longs. I had expected metals to back off but clearly after today’s action the bulls remain in the driver’s seat. Gold traded above the 100 day MA for the first time in seven weeks and now has completed a 50% Fibonacci retracement. Just above $1750 in February is the 61.8% Fibonacci level. Silver is above its 100 day MA the first time since mid-September when prices collapsed from above $40/ounce. I expect prices to get back near $37 but not before a correction but at this point we may juice prices a bit higher. I am holding out for new entries for clients under $30/ounce. The dollar continues to drop losing 0.50% as of this post. With dollar weakness comes strengths in other crosses. The commodity currencies were the best performers with the Euro and Swiss slightly behind. Signals point to higher trade in crosses and lower in the dollar. I unsuccessfully recommenced picking a top in the commodity currencies and traders should have been stopped at a loss. Cocoa should continue to work higher on further dollar weakness.. 2500 in March is the 100 day MA..use that as your target when evaluating risk to reward. Cotton is sale with stops above the recent highs. If coffee breaks the recent lows expect $2.00 to be breached in March. The sentiment is bearish in Treasuries and if you notice today the 20 day MA rejected further upside…that level continues to be your pivot point; in 30-yr bonds at 143’6 and 130’24 in 10-yr notes. 2013 Euro-dollars are at fresh contract highs…let them work higher and we will be looking for bearish entries on a sign of an interim high. Corn and wheat closed back over their 20 day MA’s. Ag traders can scale into longs expecting further upside. My suggestion would be to build a long position and to stagger stops behind the market. Trail stops on longs in live cattle as a new contract high was rejected…do not rule out profit taking. Lean hogs were slight gainers…stay long and run stops just under the 20 day MA.

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

Turning Point 1/24/12

Matthew Bradbard — Tue, 24 Jan 2012 22:08:15 +0000

Turing point…not today and probably not tomorrow but I would expect the equity market to give back its recent gains in the very near future. What that likely means is money out of stocks and into Treasuries and commodities…just an opinion. Crude remains in no man’s land as prices could go either way in my opinion. My bias is leaning to the bullish side but I would prefer to be buyer on breaks. For instance I see solid support in March just under $94/barrel so long entries closer to that level sound extremely appealing. In two sessions natural gas has leapt 15% with a close back above the 9 day MA today for the first time since early December. It is too early to call a bottom but a spike in volume and the capitulation we got are precursors for a bottom being established…stay tuned. Another gain today in equities but the pace is waning with prices higher by 0.25% on average. I know it is a broken record but expect higher ground as long as the 9 day MA holds. FOMC decision tomorrow could derail the ascent so stay alert. Gold closed back under the 50 day MA giving up 0.75% today. Weekly charts still look supportive but the daily screams overbought. $1650 in February will need to hold or I would move to the sidelines. For the first time in five sessions silver failed to make a new high on an inside day today. Like gold the weekly chart still appears like we have more upside but prices have started to roll over on the daily chart. I say lighten up or tighten stops as we may be close to an interim top. The dollar index failed to make a new low but as long as prices remain below the 50 day MA I remain bearish; that level is 80.10 in March. The Euro and Pound remain buys while the commodity currencies appear like we could see a retracement…trade accordingly. The Yen broke down today breaking all short term MA’s. I am expecting a move back under 1.2600 on this leg. Cocoa bounced off the 50 day MA surging almost 7% today lifting prices to two month highs. Try timing a long entry again buying a dip placing stops just under the 50 day MA. Corn was higher by 1.7% today while wheat added 2.2%. I’m comfortable buying dips in either Ag product placing stops under the recent lows. I think in the coming months we could see March corn above $7/bushel and wheat closer to $7.50/bushel. April live cattle is on the verge of making new contract highs having appreciated 4% in the last two weeks. It has been a nice run for bulls but there is no reason to believe prices should not see higher ground. April lean hogs are running into trouble at the same resistance level that capped upward momentum in late December. That being said as long as the 20 day MA holds at 87.30 I remain friendly.

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

Looking Ahead 1/23/12

Matthew Bradbard — Mon, 23 Jan 2012 21:06:24 +0000

Fed meeting this week as well as any new developments out of Europe. My suggestion is to always look one-two weeks in advance for upcoming economic events when initiating trades. Just when it appears Crude was destined to move lower prices reversed finishing 1.65% higher today. $1oo appears to be a magnet for pricing and until we get $3-4 north or south of that level expect sideways action to continue. I do not feel comfortable trading either side currently. A 9% appreciation in natural gas after posting a new low could be the capitulation low. Stay tuned but if prices can overtake $2.75 this week and hold onto gains we may have a low. As I hinted at last week prices generally make tops and bottoms at extreme sentiment levels and everyone has been bearish natural gas of late. Equities crept higher today as the appreciation ytd is now over 3%. As long as the 9 day MA holds I remain friendly. Gold traded above the 50 day MA for the first time since mid-December when prices were above $1700/ounce. As long as $1650 supports we should see further upside. The 100 day MA at $1700 should be obtained in this leg in my opinion. Silver picked up 2% lifting prices to six week highs as prices are approaching the 100 day MA. Bulls remain in the driver’s seat and I cannot rule out a further $2 appreciation in the weeks to come. Continue to trail stops though as prices are nearly 25% off levels seen just three weeks ago. The dollar has lost ground five out of the last six days closing below 80.00 for only the second time in 2012. I see further downside to come. All crosses with the exception of the Yen can be bought on dips. The Euro and Swissie will likely provide the best opportunities as they got hit the hardest in recent weeks and months. OJ continues its climb to fresh record highs putting on almost 4.5% today. I do not see upside resistance being we’re in uncharted waters. If coffee breaks the lows that held the last two months expect a test of $2/lb…trade accordingly. The momentum is shifting to the bears in Treasuries as 10-yr notes and 30-yr bond have lost ground the last four sessions. Weighing the risk soybeans have advanced too far but aggressive Ag traders could lightly step into corn and wheat with stops below the recent lows. I would be building a position assuming the market proves you right. Remain in your lean hogs and live cattle longs with stops just below the 20 day MA’s. Forced to pick one livestock trade I prefer bullish exposure in April lean hogs.

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