MBWealth's Commodity Blog » unemployment

Risk Appetite 10/6/11

Matthew Bradbard — Thu, 06 Oct 2011 20:59:44 +0000

Investor appetite for risk has increased as money is flowing back into securities and commodities. Crude has advanced $7.50 off its lows from Tuesday so clearly there is buying interest but we would like to see the ascent slow or even a re-test of the 9 day MA to feel confident a further move is sustainable. That level comes in at $80.50 in November. If we get a slight retracement we would continue to buy dips with an upside target of $84/85 into next week. Heating oil and RBOB have likely survived there worse and should be heading north once again. Hedgers should have some coverage in both distillates to protect from upward price surges. We feel there is more of a risk of higher prices than lower in the immediate future. One of my clients brought to my attention a new double long natural gas etf (BOIL) was launched today but it appeared to have little effect on the underlying commodity itself. We are optimistic longer term in natural gas but as we said yesterday before gaining fresh exposure we would like to see a settlement above the down sloping trend line that has capped all rallies since June. Indices penetrated the trend line that has existed since the first week of September settling just above the 20 day MA. We see more upside, a trading range will likely continue until we get new developments domestically and abroad. The idea of kicking the can down the road has stocks investors confused and the markets sideways…trade accordingly. A trade through $1600 tomorrow should get gold back above $1700 in the next few sessions. We’ve suggested for clients to purchase February 2012 bull calls spreads thinking we see a re-visit of the record highs within that time frame. Silver picked up nearly 6% today and appears on the verge of breaking out the upside. We see $33.50 followed by $35/ounce in the near future and have been suggesting long exposure for aggressive clients. There are various options and future strategies to get bullish so do not hesitate to reach out for suggestions depending on your capital size and risk tolerance. Day three of the dollar retracement losing .45% as of this post. Our target remains the 20 day MA and then we will re-evaluate how the market reacts at that level; in December at 78.40. With commodities strengthening the commodity currencies should benefit the most in the short term. Our favored play is bullish exposure in the Loonie looking for par. A bullish engulfing candle and spike in volume may have signaled a bottom in cocoa….stay tuned. We like long exposure in March with the 50 day MA as your target. On a 5-8% appreciation in OJ look to exit remaining longs…at a profit or loss. Treasuries are down today ahead of tomorrow’s jobs number with 30-yr bonds closing at the 20 day MA and 10-yr notes just under that pivot point. Further weakness will be used to exit clients open shorts in 30-yr bonds. The only viable play we see in this complex is playing the short end of the curve through long dated bearish exposure in 2012 and 2013 Euro-dollars. Wheat was slightly lower in today’s’ trade while corn and soybeans were unchanged after giving back their gains overnight. Back off any wheat purchases but continue to scale into longs in corn and soybeans. Our suggested play is long futures and selling out of the money calls 1:1. Our target in March corn is $6.60 and our target in January soybeans is $12.75. Clients are still waiting for a break to get long 2012 live cattle contracts. We will likely start gaining bullish exposure in February for clients closer to $1.21.

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

Game Changer 11/4/10

Matthew Bradbard — Thu, 04 Nov 2010 19:47:44 +0000

The Fed spoke and the markets have listened. Buy withboth hands…stocks, Treasuries and commodities should trade higher till’ the end of the year. This does not mean buy and fall asleep at the wheel but we will be issuing more buy then sell recommendations moving forward. Crude oil has broken out and should make its way to $90/barrel. On a set back we will be getting clients out of shorts at a loss and suggesting bullish futures and options entries. Natural gas fought back in late dealings to close marginally higher. On a settlement above the 20 day MA we suggest adding to longs in January futures. Options traders should be in January contracts as well. Bulls are in control in the indices, on a moderate set back clients will cut losses on their ES put options but for now we wish not to get long. Cocoa was unchanged after being up most of the session. On a trade lower tomorrow clients will be advised to exit their bearish plays. The appreciation in cotton and sugar continues but clients will wait to get short as opposed to jump on the train at these levels as longs are far too late in our opinion. Coffee broke out to fresh 15 year highs; exit all shorts as this move could turn parabolic similar to sugar and cotton. 10-yr notes rallied to new contract highs and 30-yr bonds look destined to do so. Clients will not get long but that is the play from here. Aggressive traders could be long live cattle or lean hogs; our pick is lean hogs thinking we could see 3-4% appreciation from here. Clearly a breakout… maybe a short squeeze but traders in metals should be long NOT short. We tried to get cute playing a correction and got run over. From here maybe $30 in silver and $1450 in gold. We’re skittish so we will keep our size down but clients will be gaining bullish options and futures exposure. Some clients have been buying silver and selling gold. For example over the last two months gold has appreciated 20% while silver has gained nearly 45%. The idea is you would make more money in silver than you lose in gold. Gain bullish exposure in grains ahead of next Tuesday’s USDA. At this juncture we would be OK long ’11 wheat, soybeans or corn. The dollar rally was short lived and at this point lower ground looks likely. The ECB left rates alone at 1.0% and the BoE left rates at 0.50%. Be alert as tomorrow we have two unemployment reports; here in the US and Canada.

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.

Is a Terrible jobs # already baked into the cake 12/4/8

Matthew Bradbard — Thu, 04 Dec 2008 21:48:32 +0000

Unless the NFP number exceeds 400,000 or uneployment is over 7.0% we expect a classic case of buy the rumor sell the fact. We are not advocating buying equities but much of the bad news may already be factored in. It appears the three stooges testifying in front of congress have not convinced them to write a check for $35B yet! Most commodities were lower today and although we are using pullbacks as an entry for select commodities you are playing with fire trying to pick a bottom commodity wide. We have suggested for clients to lighten up on size and to be aware of the risk of timing these markets. Additionally options may be more approriate than futures in some instances. We will be looking to buy gold and silver on the setback the next few days. Sugar and natural gas also have our attention. We have once again navigated the waters and profited on the yen looking to buy another setback still looking for a new contract high above 1.1100. We are lsoing in our grain longs but do expect a shift higher in the near future. Stay with May options and we will look for futures entries next week in soy and corn.