MBWealth's Commodity Blog » BOE

Market Vindication 10/7/10

Matthew Bradbard — Thu, 07 Oct 2010 20:01:46 +0000

Today could mark a key reversal for several markets including but not limited to the US dollar, metals and energies. Oil reversed from these same levels in August…will history repeat itself? In recent blogs we hinted at this and on confirmation tomorrow Crude will likely move back to the 50 day MA; in November at $77.70. If that is the case we’ve seen an interim top in the distillates as well; that would drag heating oil and RBOB 12-15 cents lower. A bearish AGA report prompted natural gas to lose 4.4-6.25% depending on the month. Some clients have thrown in the towel; others will likely be out in the coming sessions if we do not move north from here. I feel we’re close to a bottom being the sentiment is so bearish but as the saying goes markets can be irrational more than most investors can remain solvent. What really irks me is that Goldman is forecasting a 20-25% advance in natural gas in the coming months and clients will likely get out at the bottom. Unfortunately some times that is the way the cookie crumbles. We will advise clients to re-establish positions once an interim bottom is established. The next leg in indices will be determined by the NFP tomorrow. We’ve positioned several clients short the S&P via November put spreads. A failed rally in cocoa, as we’ve voiced our downside target is 2600. Sugar rallied 6.88% today; if a new high is not reached we will be looking to add to clients short positions. Same story in cotton if the recent high acts as resistance we will be looking for bearish plays. Although we would have liked a larger rally aggressive traders could be short coffee with stops above $1.7850 in the December contract. Lean hogs traded to a three month low today though pared losses by the close. If we can find some buying interest around these levels we may start probing longs for clients. We would recommend booking profits on ALL remaining shorts. Could today be day1 of the correction in metals? Gold will close just over $30 off its highs, silver nearly $1 and copper just over one dime. It is way to premature to celebrate but our more aggressive clients are positioned short gold and silver thinking a sizable correction is around the bend. Targets in December gold are $1295, 1278, 1256, 1235 and December silver $21.23, 21.00, 20.40, 19.75. USDA out tomorrow before the grain open. We’ve positioned some clients slightly long July 11′ corn. We feel both soybeans and corn will benefit from the fight for acreage and we will have buy objectives and price targets in the days to come. The dollar lifted its ugly head today to close positive and looking at a candle stick chart a doji star on good volumes. The ECB and BoE left rates alone today at 1.0% and 0.50% respectively. Our featured play in forex remains shorts in the Loonie expecting .9550.

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

Holding My Ground 10/1/10

Matthew Bradbard — Fri, 01 Oct 2010 20:27:31 +0000

I’m sticking to my positions and holding some winners and some losers putting it out there. For some followers who have to date failed to recognize some of my trades will be losers while others will be winners. Crude oil prices are at a seven week high approaching $82 in the November contract gaining nearly 7% this week. We could see this leg lift prices to the highs from early August which would be $2 from their current levels. As long as Crude continues moving higher RBOB and heating oil should continue to gain. For every $1 move in Crude futures we would expect the distillates to move 3-4 cents. Natural gas was lower by 4% from Monday’s opening but that was after a gap lower trade on Sunday night so this chart is far from bullish. That being said we’re bucking the trend with clients advising a small bullish allocation in November and December futures and options. This trade has been tough but we will see it thru next week as long as prices hold these levels. Fortunately for most option holders we had call spreads and have advised clients to leg out of their top leg on this down move so an up move is welcome and overdue. Sloppy sideways action in indices this week. We suggest being a seller; our featured play is November 1:2 put spreads. Today traders could’ve bought the 1150/1050 1:2 for just over $850 plus fees. Softs are a sell it is that simple; we feel sugar, cocoa, cotton, OJ , coffee and lumber should move lower. Look for trade ideas in next week’s posts. Today clients were advised to book profits on their December coffee put spreads. We stepped to the sidelines in Treasury shorts for clients today at a minimal loss and will re-evaluate next week. The reason there are four Central bank meetings and NFP next week. Feeder cattle are back above the 20 day MA, if you remain long trail stops. On further momentum $1.14 may happen in the November contract next week. If live cattle break the trend line at 98.50 we will suggest exiting longs, on a breach of the 20 day MA we will be looking to add to longs for clients. Gold and silver have yet to correct but we think it is likely very soon. Just look at the action this week in agriculture. Corn is 63 cents off their highs, soybeans have lost 87 cents and CBOT wheat over $2 from their August highs and $1 in the last week. The dollar feel off a cliff this week and we got it wrong thinking the other crosses were overstretched…perhaps a week too early. Look for action from the RBA, BoJ, BoE and ECB to guide next week. Take profits on Yen longs, cut losses on Pound shorts and continue to fade rallies in the Loonie.

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

Shortened Trading Week 9/7/10

Matthew Bradbard — Tue, 07 Sep 2010 20:09:53 +0000

With Labor Day and the Jewish holidays expect volatile moves this week. October Crude has finished lower the last two sessions but as a trader what I’m interested in is that prices have closed $1-1.50 off their intra-day lows. We expect the recent lows to hold and for prices to make their way north of $80 in the coming weeks…trade accordingly. What I also noticed is that even on a day like today when Crude ended lower check out the distillates; RBOB and heating oil may be the strength that drives Crude higher. Inside day in natural gas with prices marginally lower in today’s trade. Our suggestion continues to be scaling into November futures and to purchase November call spreads. The 200 day MA appears to be acting as a pivot point in the indices; that level in the Dow is at 10340 and in the S&P at 1107. We feel there could be a touch more upside and then we will likely be getting clients short ES futures and options; look for trade recommendations later this week. Sugar advanced further today hitting a 7 month high. Prices are overbought but the rising OI is not signaling a top just yet. Clients have a small put position in March 2011 and are carrying a loss. Cotton too continues higher hitting a 2 year high today, higher by nearly 2%. Some clients are also carrying a loss their via December 2010 puts. A new 13 year high in coffee today; clients have NO exposure. Treasuries were higher today likely due to the news out of Europe on their recent stress test results. Some clients are positioned short thinking the recent highs will serve as an interim top. Our target in 10-yr notes is 121’00 and 126’00 in 30-yr bonds. Bloodbath in livestock today with the entire complex pork bellies to feeder cattle lean hogs to live cattle were all lower by 1.7-2.0% today. December live cattle broke the 20 day MA today for the first time in 3 months. We’re suggesting bearish plays to clients with a target of 96 cents. Gold prices are within 1% of their record high. My opinion if your not currently long remain on the sidelines; our clients have NO exposure long or short. $20 appears to be acting as stiff resistance in December silver. We remain cautiously long with most clients via futures or December call spreads. On a $1 correction in the futures we would be looking to -re-establish longs in December futures and/or March 2011 options for clients. Continue to buy dips in corn and wheat. For specific plays in KCBOT or CBOT wheat or corn do not hesitate to contact us. The breakout higher in oats could signal another leg higher in the grain complex. Though we rarely trade oats we do follow this market and so should you. With four Central Bank meetings this week (BOJ, RBA, BoE, BoC) sit on your hands in this sector until next week.

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

Russia keeps things Interesting 8/5/10

Matthew Bradbard — Thu, 05 Aug 2010 20:11:54 +0000

The move by the Ag minister in Russia overnight kept things interesting in commodities today. Aggressive traders could look at shorts in Crude oil as long as prices remain below $83 in the September contract. Some clients started to price out October and November put options today…stay tuned. We are anticipating a trade back to the trend line that has held since early July which would drag prices $4-5 lower. If our analysis is correct in Crude we would expect to see a drop in the distillates of 15-20 cents over the next few weeks. Natural gas broke the up sloping trend line today but the 100 day MA did hold. We suggest refraining from futures but still like the idea of November 50 cent call spreads. Previously purchased spreads may opt to buy back their top legs once an interim bottom is established. Tomorrow’s jobs number will determine where from here in the indices. We would continue to fade rallies in the S&P thinking we are in the ninth inning and see NO new bullish developments. The S&P has rallied 12% and I see no reason for that magnitude of a move. If you do please post a comment and let me know what I’m missing. We like the idea of December ES put spreads. Sugar lost just over 3% today; as previously stated a 10% correction looks likely. We would suggest looking for long opportunities closer to 16.25- 16.50. Weak close in December cotton today closing 2% off its high; buy December put options. Coffee looks heavy; we feel a move back to $1.50-1.55 could happen in December relatively quickly. Treasuries will wait for tomorrow at 8:31 EST before making a decision as 30-yr bonds have had a 1 basis point range for the last four sessions. We would like to get bearish exposure but have yet to make a move with clients. Live cattle failed after making a new contract high; after a setback we will be looking to get clients long again. The 20 day MA which has supported for the last month comes in at 95.90 in December. Lean hogs put an interim top this week; sell rallies. We expect to see prices track back to 70-72 in the October contract. As long as gold remains above the 100 day MA the bulls are in the driver’s seat; in December at $1190. Clients currently have NO exposure. The 100 day MA also supports in September silver at $18.15. Aggressive traders could have stops just below that level. We prefer buying December call spreads on dips. September copper closed down 1.76% today and looks heavy. If indices turn south we think a trade back to $3.20 is likely. The fact that Russia temporarily banned wheat exports all bets are off in the grains sector. Where the top is was the question I was asked today and my answer I have no idea? On a correction we will be looking for long opportunities but we suggest taking your position size down and to possibly trade options instead of futures because when prices correct we could move down twice as quick. December corn closed to $3.80 is a BUY in my opinion and we will try to be a buyer ahead of 8/12 for clients if given the opportunity. We will need to see the dollar back above the 200 day MA tomorrow to believe a rally is upon us. The 80.50 triple bottom seems to be support. If and when we get a squeeze in the dollar we expect the Euro and Swissie to get hurt the most…trade accordingly. The ECB and BoE kept rates unchanged at 1.0% and 0.50% 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.

Investors risk appetite returns 7/8/10

Matthew Bradbard — Thu, 08 Jul 2010 20:15:18 +0000

As long as indices tread water or move higher money should flow back into commodities and out of Treasuries and the US dollar. Crude followed thru today and now has the 20 day MA in its sights. As we said yesterday as long as equities move higher we think we could see crude appreciate $3-5 relatively quickly. As of this post August is higher by $1.70. For the time being we would treat Crude as a range trade with resistance around $80 and support around $70. We advise position traders to remain long as long as August holds the $73.40 level. With an additional $3-4 move north in Crude we should see the distillate move approximately 15 cents. August natural gas broke $4.50 today; futures traders should take off their longs at a loss. We continue to like buying clients October 50 cent call spreads but they may get clipped a little in premium in the coming sessions. That being said scale into the trade and do not try to outsmart the market. Sideways congestion in indices was expected after yesterday. We’re looking to be a seller from higher levels in the S&P. It is my opinion we will see upside surprises on earnings that will paint a false hope allowing our clients to get short closer to 1100 in the coming weeks. We worked out of some of our client’s longs in October sugar today and hope to see a higher trade tomorrow and to work out of the remainder. Inside day in cotton today; clients need a trade at/or around 73 cents in December to get filled on their gtc profit orders. OJ was lower by 5.43% today. Another 7-10% decline and we may have an interest in buying November calls for clients. Aggressive traders can continue to short Treasuries with stops above the recent highs. As we said yesterday we’re looking to lighten our clients exposure in currencies before stepping into September NOB spreads. Trail stops up on your live cattle longs; we remain bullish but prices have appreciated nearly 4% in the last three weeks and nothing moves in a straight line. Buyers were able to support silver again today with September closing flat on the day but remaining above the 100 day MA. We suggest longs in September futures and purchasing December call spreads. In our opinion gold could go either way; we would use a settlement above $1216 or below $1173 to signal the direction of the next leg. September copper failed to get above the 50 day MA today; a level that served as resistance last week as well. We would expect a trade above $3.06 to lead to a probe of $3.20-3.25. We are satisfied with the performance in grains of late but the problem is we’re anticipating a setback to add to longs for clients and to remove previously placed hedges. Tomorrow morning’s USDA supply and demand report could deliver the set back we’ve anticipated. Use setbacks in agriculture to be a buyer. The Loonie continues to work higher and we suggest buying dips. The Swissie which some clients are currently short continues to stubbornly inch higher. We still anticipate a trade back to .9200 but if we do not roll over soon we will cut losses. As expected the BoE left rates at 0.50% and the ECB at 1.0%.

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

Contrarian Ideas 6/10/10

Matthew Bradbard — Thu, 10 Jun 2010 19:57:00 +0000

Crude is back above $75 for the first time in 3 1/2 weeks advancing for the fourth consecutive session. On the highs prices got within 30 cents of our first target; again$76.60 and then $79 are our objectives. It is entirely possible we run into resistance just above today’s highs so if you have sizable positions lighten up or tighten stops. Natural gas tested the 38.2% Fibonacci level today but we still want to see more back and fill action before re-establishing longs for clients. Another 20 cents lower and we suggest working long September contracts. Can you say short squeeze? The S&P hit out first sell objective but we backed off and think there is more upside in the immediate future. The sentiment is so bearish we have decided to stay on the sidelines with clients thinking we can see a trade back over 1100…maybe 1125. The 200 day MA at 1100 and the 50 day at 1145 should serve as resistance. Sugar has gained 8% in the last 5 sessions; we expect another 5-8% before abandoning client’s current longs. Aggressive traders could short December futures in cotton with very tight stops. We prefer buying December put options with our clients. OJ and coffee were two markets I was waiting for lower ground but they look to be firming up so I will re-examine both commodities in the coming days…stay tuned. The Treasury complex appears to be rolling over as money finds its way back to risk assets. Clients are in NOB spreads; short 30-yr bonds and long 10-yr notes. As we said yesterday we expect 120/121 in September bonds. December live cattle remain on our buy list via futures and or options. Gold was lower today but held the 20 day MA and trend line. If flight to quality money leaves gold prices could get hit $35-50 ounce at a moments notice but we would buy the dip and advise commodity investors to have a portion of their accounts in either gold or silver. Silver fared better today gaining 10 cents. We suggest using $17.80 as support and $18.50 as resistance. Most clients are long in either futures or options expecting $19/ounce very soon. Did a USDA report actually help our clients yes it did happen today on bullish news on corn. Ending stock lower, ethanol usage higher, imports to China higher not to mention the weekly exports were supportive as well. Continue to buy September options or December futures assuming the low this week is an interim bottom. Of course this is an assumption not a certainty….time will tell. The dollar has lost ground for three sessions now and appears poised to break the 20 day MA for the first time since mid-April. We advised clients to exit their remaining Loonie longs and to place gtc profit orders on their Aussie longs. The Loonie is higher 1.23% and the Aussie 2.68% as of this post. The ECB and BoE kept rates as is which was no surprise. A new trade idea for clients today; they bought July put options in the Yen. Our logic is if the indices rally we should see the Yen break down less than 1.0800.

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 New Correlations 4/7/10

Matthew Bradbard — Wed, 07 Apr 2010 19:46:49 +0000

Metals, energies and stock indices appear to be moving in tandem with one another. The inverse relationship between Treasuries and equities also seems to be back in play. Crude failed to make a new high and those looking for a dip to get long we could see prices come back to the 20 day MA; in May that level is $82.60. We are not advising shorts but we may have made an interim top on futures yesterday around $87/barrel. We would advise tightening up stops on longs as to not give back profits. Buy dips in natural gas as we’ve seen the last 2 sessions. We’re advising a small long in May futures and July 50 cent call spreads. Could indices finally be rolling over; as of this post it appears so. Assume we do get a set back your targets should be as follows: 1140 in the S&P, 10550 in the Dow, 1890 in the NASDAQ and 650 in the Russell. Sugar looks to be forming a base, we’ve yet to commit capital with clients but we’re tracking July and October anticipating a long entry in the coming sessions. We like the open interest in the July 18.50 and 20 cent calls and the October 20 cent calls. Cotton has tuned lower once again; aggressive traders could sell rallies as long as July stays below 84 cents. We will have some bearish options strategies in the days to come. A near 15% loss in OJ prices has us close to entering longs for clients…be patient we’re getting close. We will most likely be looking at September contracts. Why the demand for Treasuries is beyond me but needless to say buyers were active in today’s auction. It appears a trade higher is ahead but we prefer the sidelines and to be a seller from higher levels with clients. Sell the rally in Euro-dollars but place a gtc stop loss above the recent highs. On the June 2011 contract from these levels that equates to about $400 risk per contract. Corn was higher by nearly 3% today on good volumes. This could be the beginning of the move we’ve been calling for. We’re advising long call options in July and long December futures. Corn remains our client’s largest speculative play. Depending on the magnitude of this rally we may be selling wheat and/or soybeans from higher levels…stay tuned. In the immediate future cattle will likely trade higher but we are looking for a way to get short as we feel in the weeks to come prices could break hard. Initially were thinking a delta neutral strategy shorting August futures and buying multiple upside calls…stay tuned. With the exception of copper all other metals were higher on the day with gold trading above $1150 for the first time since mid-January and May silver closing back over $18/ounce. If we see $18.50 we will be looking to exit all clients July longs…stay tuned. Aggressive traders we are again advising shorts in the Loonie with stops above today’s high. A 2% move lower could happen relatively quickly in our opinion. Expect fireworks tomorrow morning on the ECB and BoE rate decisions. At the moment both crosses are in a sell rallies mode.

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

Managing Risk 2/3/10

Matthew Bradbard — Wed, 03 Feb 2010 21:15:03 +0000

Disappointing inventory news and oil still held up well only down 25 cents on the day. Use $76 as support in the March contract; our objectives on the upside are $78.25 & then $79.60-$80. Depending on how tight your stops were on natural gas you may have been stopped at a profit; prices traded 1-2 cents lower than yesterday. We suggest on a trade above $5.75 to take remaining futures off and to exit your call spreads. We are still waiting for a trade up to 1105/1115 to be a seller in ES and SP for clients; until then no action taken. The correction in sugar we were anticipating is in play with prices breaking the 20 day moving average today. The calendar spread (short March/ long July) picked up 72 ticks today per ($806.40). We will be unwinding this spread for clients tomorrow if spread narrows just a touch more. Remember on a trade up to $1.50 in May OJ exit your back ratio spreads. Anyone who shorted lumber which we had mentioned in passing a few days ago should have been stopped out at a loss $800-1200/per depending on your placement as prices have advanced 12% in the last 4 days. We are looking for a way to get short Treasuries pricing out a variety of time frames in both futures and options…stay tuned. Continue to scale into shorts in 2011 Euro-dollars. Agriculture got hit hard today on NO real news. We were forced to hedge off some of the risk for clients long December futures; we advised buying March $3.60 puts which will give downside protection into the USDA report. On a trade below $9.14 cut losses on your May soybeans, you should have got stopped at a loss on soy meal for approx. $500/per. We suggest holding your May soy meal call options. In live cattle clients shorted April futures today against a purchase of (3) April 92 cent calls. This is a delta neutral strategy to take advantage of downside in the short run while having protection if prices move higher. In a perfect world we break lower cover futures at a profit and then see prices trade higher several weeks from now. Being we could not take out the upward trend line we advised clients to liquidate their June call spreads in gold at a slight profit today. Those who still wanted exposure we advised lightly buying April gold futures with stops between $1105/1107 gtc. We tried to scalp silver and lost 10 cents when the 100 day moving average gave way. Option traders in May stay the course; we still like buying May $2 call spreads. We took the Euro/yen spread off today for clients and will look to re-enter below.2900 on overnight or tomorrow early. Be nimble if trading forex as the ECB and BoE meet tomorrow and NFP # is out Friday.

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

Gearing up for NFP # 11/5/9

Matthew Bradbard — Thu, 05 Nov 2009 20:23:11 +0000

Oil is still trying to make up its mind on where to go. We have no opinion or positions currently but will most likely have suggestion in the coming weeks. Natural gas looks to close at slightly better levels, we still like 75 cent January call spreads. Fresh short entries in cocoa enjoyed sliding prices but unfortunately for December puts too little too late. Sugar gave up 3.5% today; we bought yesterday for clients…not the best timing. We continue to think March will return to 25/26 cents. The trend line all year comes in around 22 cents, if this level gives way we may re-evaluate. Whether I agree or not stocks appear to be moving higher. We will explore selling from higher levels with clients. My gut tells me metals are due for a correction, that being said we exited clients gold longs at a marginal profit today. We will stay with the silver as both metals should move in the same direction. On a correction we will buy back into gold, on a move higher we still are long silver. A break in the clouds in the mid-west and grains were hit today. It is too bad we just missed our profit objective in corn and will now ride the position down. We think this leg lower will be short lived so recommend staying long. Soybeans were down almost 3% today, there could be another 40-60 cents in this leg. The entire Treasury complex moved higher today, we are bleeding a bit in the NOB spreads and short Euro-dollars but we will stay the course. Live cattle were mixed today; continue to accumulate longs in February. The ECB and BoE kept rates at current levels; ECB at 1.0% and BoE at 0.50%. As previously stated we will be looking for short opportunities in the Cable and Euro.

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

Decoupling…1 day or New trend 11/3/9

Matthew Bradbard — Tue, 03 Nov 2009 20:04:19 +0000

Dollar up commodities down, stocks up oil up, stocks down Treasuries up…well not today. Be wary of the decoupling as new relationships may be forming. We are thankful we took oil shorts off yesterday for clients albeit at a small loss being prices were higher by $1.25 today as of this post. Natural gas is higher by 2%, clients were able to buy the January $5.50/6.25 spreads recommended yesterday at a slightly better levels today paying $1800/per. Sugar looks to be starting another leg up, gaining almost 2 cents in the last 4 sessions. We have light long exposure and will be shopping ways to add length for clients. Mixed results in the other softs, no stand outs. Agriculture was well bid today; our client’s exposure includes long corn and long KCBOT wheat/ short CBOT wheat via a spread. Silver and gold were convincingly higher in today’s sessions. Gold clearly broke out to new highs on Central bank buying. Call spreads in April is the vehicle of choice though we prefer silver. We bit the bullet and bought most of our clients May $19/22 call spreads today. For straight out futures buy 30/50 cent pullbacks. Middle of the road trade one could sell out of the money calls and buy futures. $16.60 should support pullbacks on the December contract; resistance is seen at the 20 day moving average at $17.30 followed by $18 and then $20. Clients were buyers of June 10′ Euro-dollar puts today. We were able to get more February calls bought today for clients. We continue to like buying intra-day setbacks in live cattle. We may be shopping some future spreads, stay tuned. RBA raised rates 0.25% today to 3.50%. D-day with FOMC tomorrow and then ECB & BoE Thursday. Expect violent moves in forex. Most likely we will be selling rallies in the Cable and Euro but not sure at what levels??

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