MBWealth's Commodity Blog » soybean meal

The Line in the Sand November 08, 2010

Matthew Bradbard — Mon, 08 Nov 2010 14:53:27 +0000

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Men vs. Boys 5/6/10

Matthew Bradbard — Thu, 06 May 2010 20:06:10 +0000

Days like today in the market separate the men vs. the boys. Any day markets move 5% in just minutes there is an opportunity to make a lot or lose a lot of money almost instantly. Some panic, others capitalize, others watch in awe. We were not in the right place with clients everywhere but today was a good day. Oil traded below $75 for the first time since mid-February. This move has shaken out a number of longs and though we’ve yet to buy once the selling slows we may have some long suggestions. From here we could move $5-7 in either direction in a moments notice so we would not suggest either direction. If a rally comes in the distillates we would again advise liquidating longs as an interim top was likely made early this week. Natural gas futures made a new low so depending on your stop placement you most likely were stopped on your long futures. Buying September call spreads remains our top pick here. The correction has arrived but we did not anticipate this magnitude; intra day the S&P was lower by over 100 points, the Dow over 800 and NASDAQ nearly 200. We used this move to lighten up on some of our shorts but most clients still are holding some ES shorts. Clients were advised to lightly start buying sugar today; most bought October 18 cent calls. Aggressive clients got short cotton today as we are expecting a trade to near 75 cents in July in the weeks to come. The higher 30-yr bonds and 10-yr notes trade the more we’re interested in shorts. Clients have yet to move but on a rally on the NFP tomorrow we may start scaling in. The short end of the curve is rolling over. It may make sense to have some downside positions on here. Soybeans and soy meal got hit hard today losing 2.50% and 1.60% respectively. We will be looking to get clients long but from lower levels. Overnight into tomorrow on a trade lower in corn we would suggesting getting long. June lean hogs closed below the 20 day MA for the first time since we gapped higher in late March; clients remain short. Gold is back above $1200 gaining nearly 3% today. This is flight to quality but we missed the boat as the divergence in other metals had us concerned. Clients have no exposure. The 100 day MA appears to be holding in July silver but we want to wait for the NFP # tomorrow before making a move for clients. July copper closed below the 200 day MA today; we expect more downside. Futures are the way to trade this market not options in my opinion. MADNESS that is all I can say about currencies today. Clients took off their shorts in the Loonie today in June and lightened up on their September puts. As long as this fear premium is in the market expect the Yen and Dollar to gain and the others to falter. If you cannot stomach volatility look elsewhere.

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

Monitor Relationships 5/3/10

Matthew Bradbard — Mon, 03 May 2010 20:09:23 +0000

Base and precious metals no longer appear to be correlated, Treasuries inverse relationship to indices no longer exist, dollar up equals commodities down right…wrong. When things do not make sense take your position size down. Mixed results in Crude today with the front month lower and back months gaining. Take for instance just the first 2 months at the beginning of April this spread was at a 25 cent discount and today it is approaching a $3.00 discount. We got the trade over $87 in June we were looking for but without a new contract high over $87.59 in the coming sessions we expect a set back. We are still advising energy traders to use the most recent spike higher in prices in the distillates to take off longs. Last weeks lows have held so far in natural gas as prices picked up nearly 2% today. We’ve yet to make a move but for the right price in the coming sessions we like buying clients August and September call spreads. Contact us for more precise details. Inside day in the indices but the bounce back is impressive. Continue to use the 20 day MA on the daily charts as your pivot point. We’ve been anticipating a correction like most but it has yet to materialize. Coffee was higher by 2.4% today lifting prices back to the 100 day MA. On a trade above $1.40 in September clients should hit their profit orders…check back tomorrow as today’s settlements should come in about $100 less than their limit. Not yet but at some point this week clients will likely be buyers of October 10′ and March 11′ sugar…stay tuned. Euro-dollars were off nicely today; aggressive traders could be short futures with stops above the recent highs. Clients will be using this rally in Treasuries to get short futures…stay tuned. Clients are long June 30-yr bond puts expecting a trade closer to 116’00 in the coming weeks. Agriculture was in the red today with soybeans and soy meal suffering the most. Expect to buy this correction but from lower levels; closer to $265 in July soy meal and $9.40 in July soybeans. June live cattle traded higher for the third session today back near 96 cents. We may not get the correction anticipated in cattle so we need to go back to the drawing board…stay tuned. If hogs fail to rally tomorrow we will most likely be adding to shorts for clients. We’re still thinking the gap in the charts about a nickel lower needs to be filled. Gold traded to fresh highs but it just does not smell right so we advised clients to liquidate their long future and options at a small profit and move to the sidelines for the next 24-48 hours. We are still waiting for a correction in silver to get clients positioned long. We missed the most recent correction and seem to be reminded of it every day. That is not necessary and we should be there next time. Copper broke the 100 day MA today and has given up over 30 cents in the last month; clients remain short looking for more. We advised clients to take a profit on their Pound shorts today around 1.5250. We expect currencies to trade off the dollar this week; a close above 82.50 expect more upside and on a close below 82.00 expect more downside. The RBA should raise IR 0.25% tomorrow so 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.

Goldman gets Grilled 4/27/10

Matthew Bradbard — Tue, 27 Apr 2010 20:22:14 +0000

Does any one really believe Goldman Sachs does not move the markets? Oil is approaching the same level it bounced from twice in the last week, will this hold true again? The action is too dicey for us to issue trade recommendations as we are seeing $2-3 swings on a daily basis. We like having exposure to the upside but with the Goldman turmoil and FOMC on the horizon it may be prudent to wait 24-48 hours. If at a profit in the distillates move to the sidelines. Inside day in natural gas as a decision should be made in the next 2 sessions on where from here. We favor long exposure but in case we are wrong make sure stops are in place on long futures. As for options we are suggesting call spreads in July-September. Contact us for more specifics. Indices are off 2% or thereabouts and the settlement below the 20 day MA’s we hinted at yesterday could come very soon; pay attention to the next few days settlements. That level in the S&P is at 1191, the Dow at 10980, and the NASDAQ at 2001. We advised clients to take their July OJ off today at about even today. On a setback we would look to re-position longs. Clients that did not move on coffee yesterday got a slightly better price on their September call spreads today as prices were off 1.35% today. We are still anticipating a bounce in the coming weeks. Treasuries were higher today trading thru last weeks highs; stops should have been triggered and you should have been taken out of your shorts at a small loss depending on your fill. We like the idea of selling rallies but we advise to wait for tomorrows FOMC decision and more importantly verbiage. Leave your spreads on in corn until you think July has bottomed and then exit your July shorts and stay in the December longs. This spread lost $88 today. Hopefully followers listed to our advice and exited their soybeans and soybean meal; soybeans lost 1.60% today and soy meal 2.50%. We had to pay a bit more on the August lean hog spreads today; clients paid$460/per today. We have a target of $800 plus. Talk about divergence gold was up by 1.40% and silver down by .90%. I do not trust the move but a settlement above $1172 could be a breakout so clients may reluctantly get long with tight stops…stay tuned. If July silver trades below the 20 day MA at $18.08 we should get the break we’ve been looking for. Copper was lower by nearly 18 cents or 5%…that’s right! The Loonie and Pound were big losers today, our targets are getting close in the Pound and were hit in the Loonie. See yesterday’s post. If the trend line gives way at .9800 in the Loonie we could get another 1-1.50 cents.

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

Weighing risk vs. reward 4/26/10

Matthew Bradbard — Mon, 26 Apr 2010 20:15:38 +0000

After 8 days of rest and relaxation we are back at it trying to figure out the best risk/reward scenarios in the commodities market. It is vital in our opinion to evaluate both before establishing positions as many commodity traders just look at the reward side of the equation. After approaching $86 in early dealings Crude was off for the first time in three sessions losing just over $1. For aggressive traders we are advising buying dips as long as the $83 level holds in June futures. On a spike higher in RBOB and heating oil in the coming sessions we would advise exiting longs or at least halving your position. We had hoped for more follow thru in natural gas today after the strong close to end out last week. Prices remain at the upper end of the recent trading range but as we continue positioning our clients to take advantage of higher ground. We suggest long futures trailing stops in June and will start pricing out July-September options. New highs were rejected in indices across the board. This is likely due to profit taking ahead of the 2 day FOMC meeting. As we posted in our weekly commentary this morning we would need to see settlements below the 20 day MA’s to feel confident an interim top has formed. Inside day in sugar; it may be premature to re-establish plays in sugar until a bottom is confirmed. We are pricing out spreads on futures but have yet to commit any client capital…stay tuned. July OJ was unchanged on today’s session; on a trade above $1.40 our objective for clients should be reached at a 15-20% profit on their July options. We started initiating longs for clients in coffee today; they bought September 15 cent call spreads to play a bounce in the coming weeks. Though clients have no exposure aggressive traders could continue to sell rallies in the Treasury complex (10-yr notes/30-yr bonds) with stops above the recent highs. On a breach of the 20 day MA in Euro-dollars look for more selling pressure. Clients were advised to lift their May short corn hedges today as the LTD is April 30. Those still seeking protection we advised to place sell stops below the recent lows in July against their December longs. Clients were advised to take any longs off in soybeans and soybean meal as prices are starting to look toppy. We are suggesting selling rallies in wheat but would prefer to be a seller of KCBOT or CBOT closer to $5 on the July contract…stay tuned. Cancel any orders to short cattle at the moment as prices may grind higher, we should have some trading suggestions in the coming days. We’ve yet to make a move for clients but we may buy the 84/80 put spread in June lean hogs the next few days if they can pay $400. Uneventful day in metals with gold slightly lower and silver slightly higher. Clients have NO exposure long or short gold/silver currently. We expect to see a correction of 75 cent s-$1 in silver and $40-60 before we have an interest in longs. Clients continue to sell rallies in the Cable and Loonie expecting breaks lower. We would not recommend trading without stops to limit losses, if prices turn south our objectives are 1.5200 and .9825 in the June contracts.

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 Curtain on Q1 3/29/10

Matthew Bradbard — Mon, 29 Mar 2010 19:41:31 +0000

Yes folks believe it or not Q1 is over this week. Crude is convincingly higher closing above the 9 and 20 day MA for the first time in 8 days. We are abandoning all short strategies as we said we would on a close above $82 in May. That is not to say we are getting long we have advised clients to move to the sidelines. Buying was rejected in natural gas today with prices as of this post off their lows but 10 cents off their highs. We are almost at our threshold for pain on longs so we most likely are close to turning around. New entries are advised to look at 50 cent call spreads in June; i.e.$4.00/4.50 or $4.25/4.75. Indices were all higher on the day but have yet to get above last Thursday’s highs. Whether we move higher or lower from here will likely be up to Friday’s NFP #. If sugar is able to form a solid base this week we will re-examine longs in July for clients next week. OJ continued its slide south as prices penetrated one key support line today. We see the next major support in the May contract about 10 cents lower. On a 3-5 cent pullback in coffee we would be willing to start moving on July 10 cent call spreads as we feel the market may be pricing in a frost premium for the crop in the Southern Hemisphere. Corn and wheat were virtually unchanged on today’s session but soybeans and the products were marginally higher gaining 1-2%. The standout was soybean meal; July should make its way to $300 as long as the 40 day MA at $264 can support. The livestock sector caught fire today on a friendly hogs & pigs report that came out after last Friday’s close. Lean hogs and pork bellies were up the daily trading limit. If shorts in lean hogs tightened up their stops as suggested they should have been stopped at a profit on the open. Based on the current action we are neutral on live cattle and would wait for the dust to settle before establishing new longs or shorts. Perhaps the most impressive moves today was in the metals sector; gold was the weakest performer but still was a marginal gainer, silver was higher by 2.8%, copper by almost 4%, platinum by 2% and today’s winner was palladium that erased last weeks losses by gaining over 4% today. We suggest waiting for confirmation because talking to some seasoned metal traders today this came out of nowhere. The US dollar is back below 82 and as expected on that int’l currencies caught a bid. We suggested trading small size and utilizing stops as this does not feel right.

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

How “Healthy”is this Bill? 3/22/10

Matthew Bradbard — Mon, 22 Mar 2010 19:56:23 +0000

The Health care bill passed its first test. Give it a few days to digest but this bill will not just go away and could have some major implications. The bears (me included)got run over in Crude oil today. Around 9AM est. this morning it appeared oil was on the verge of breaking down but as of this post the futures are 70 cents higher and $2.80 off the lows. We are advising swing traders to sell near $83 and buy near $78 but we really thought this was the beginning of the break we’ve been looking for…back to the drawing board. Natural gas made news lows but paired losses as at least someone besides just my clients are willing buyers at these levels. We suggest scaling into May futures and June call spreads expecting a trade closer to $5 in the weeks to come. Indices should finish higher on the day but the Russell, Dow and S&P failed to make new highs even with the strong reversal. Though we feel like a kid who is playing with fire we are advising clients to have a light short in the S&P with stops above the recent highs. While we feel there will be a time to buy sugar we have no interest establishing new positions with clients as 3-5% daily swings are becoming commonplace; it feels like Vegas and is not for me. Still looking for more upside to be a seller of Treasuries; closer to 120’00 in 30-yr bonds and above 118’00 in 10-yr notes. Corn lost 1% today closing just below the 20 day MA; use a setback to establish long exposure if you have not already. Soybeans were higher by 0.70% today and could see higher ground in the immediate future but we would prefer to be long from lower levels with clients. To take it a step further on a trade over $10 we may look to get short…stay tuned. Outside of corn our only Ag play with clients is long soybean meal; expecting July to trade above $300 in the coming weeks. Based on the market reaction to the Cattle on Feed report today we think last Friday live cattle put in an interim top. Those eager to get short we are suggesting selling rallies in June and August thinking we could get a trade 3-4 cents lower on top of the penny today. Gold and silver were losers today but we did close well off their intra-day lows. Gold probed below $1100 as expected but we think there should be more to come; target $1075 and then $1045 in April. Use $16.50 as immediate support in May silver though we expect a trade closer to $16 this week or next. When May copper breaks $3.30 look out below but until then expect a 10-15 cent trading range/3.30-3.45.The Loonie closed down for the third consecutive session but we will need to see more weakness in metals and energies to see continued selling as we’ve forecast. On our radar but no action taken yet…selling the Yen from higher levels. We should have some trading ideas in the coming days.

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

Where from here? 3/11/10

Matthew Bradbard — Thu, 11 Mar 2010 20:36:08 +0000

Markets seem to waiting for some type of catalyst to determine the direction of the next leg. Inside day in Crude oil as prices hover around $82/barrel. For new entries we still like the idea of $5 put spreads but we would start looking at the June as opposed to May contract. If currently in the May we would try to buy back the bottom leg; we have suggested for clients to buy back their $70 puts and that would leave them long the $75 puts. A disappointing day for longs in natural gas as yesterday could prove to be just a head fake. Clients remain long via April futures and June call spreads as prices were off 2.4% today. As of this post indices are at the high of the day; we think we are close to an inflection point but we’ve been wrong for the past 2 weeks. If the S&P closes above 1148 exit short futures at a loss. Fourth consecutive down day in sugar but we are assuming yesterday’s low at 18.82 in May will serve as support. May cotton has lost 3.8% in the last 5 session and closed below the 20 day moving average for the first time since February 8th. We are expecting another 2-4 cents and will then be advising clients to lift shorts. Corn was flat on the day while wheat was a small loser and soybeans giving up almost 3%. A larger crop from South America could pressure soybeans another 30-50 cents. Clients are long July soybean meal and down but we are looking for prices to rebound within that time frame, we may average in next week. Additionally they own puts in May soybean oil and should be able to book a profit next week on a move under 39.00 in May. Trail stops down if you are short lean hogs; if the 9 day MA gives way we should see a trade under 70.00 cents in April. Mixed bag in metals; we are still anticipating a trade lower in gold, silver , and copper before we see any substantial upside. The Commodity currencies (Kiwi, Aussie, Loonie) look vulnerable; clients remain short the Loonie expecting a trade under .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.

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

Matthew Bradbard — 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.

March Madness 3/5/10

Matthew Bradbard — Fri, 05 Mar 2010 20:47:27 +0000

This phrase is coined for the college basketball tournament but I think it is an accurate description of what to expect as a trader this month. At its highs today oil was less than $3/barrel from making new highs on the year. Being bearish for the last 1-2 weeks has made our clients NO $ but we still feel a trade to $75/76 is imminent. We are not disputing a trade in summer is likely up to $90 but first a correction. We still favor $5 put spreads. Natural gas should finish down 3.5-4.0% lower on the week. That is not too bad! Clients have a small long position in April futures and June call spreads and at the moment are all under water. We expect the next 2 weeks to be better to us in energies; that means crude down and natural gas up. Are you kidding me that we only lost 36,000 jobs and unemployment did not change? The equity market is being propped up by the powers that be and if the free market determined prices we would be at least 10% lower. Clients are down on their June ES puts but will stay the course being they have over 3 months time. Sugar closed up 2.4%; we suggest being long May and July via options looking for a move back to 26 cents. For the first time in 4 weeks cotton will finish lower; clients are positioned to take advantage of a set back to 75/76 cents in May. Treasuries were hit hard today and we do think more downside is likely in the coming months but we still feel one will get the opportunity to put on shorts from higher levels. If the recovery is underway which I question and there is more talk of the Fed raising rates traders should re-visit the idea of short Euro-dollars. The charts look like in the next few sessions Agriculture will trade lower. Aggressive traders could use that to get short while I would prefer getting long from lower levels. USDA report out next Wednesday. Our current positions for clients in Ag include long corn, long soybean meal and short soybean oil. We have no positions in lean hogs with clients but it appears a double top could be forming around 74 in the April contract; that level acted as stiff resistance in mid-January as well. Live cattle finished about 1 penny higher on the week; clients remain short expecting a trade back near 89 cents in April. We caution any exposure in gold as we could see a$50 move either way. If lower we would suggest buying the dip. May silver closed at the 100 day moving average today about 15 cents off its highs. We like being long but would prefer to open fresh longs on a set back to $16.50. If we do see a retracement that holds we would think the next leg up would lift prices to near $18.50 mid-summer. Clients were advised to take profits on their Yen shorts today as prices have peeled off 3 cents in the last 2 sessions. We advised those still interested in currencies to get short the Loonie. We are looking for a move in the Loonie back under 95 cents. We are operating under the influence that stiff resistance comes in at .9750/.9800.

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