MBWealth's Commodity Blog » yield curve

Hello Turkey 11/23/11

Matthew Bradbard — Wed, 23 Nov 2011 20:53:38 +0000

A great saying I read on one of the blogs I read…eat turkey and do not be one. It was referring to doing homework when trading…having a plan and executing it. I for one am looking forward to some turkey and family time …until next week! Crude oil worked lower again today as it appears this will be the second week that we see prices under pressure. We have traded approximately $7 lower and we think we’ve experienced about 50% of the expected move. Our targets in January are $92 followed by $89.50. RBOB is already finding buyers around current levels and the fact that heating oil has completed a 61.8% Fibonacci retracement we do not expect much more immediate downside. We have suggested our hedgers in distillates to start gaining partial long exposure. Natural gas is higher by 2% back above the 9 day MA. We like being long January, February and March contracts. By early Spring we expect to see prices 15% higher than they are currently…trade accordingly. Our downside objectives have been met in the indices with the S&P at 1162 and Dow under 11300. We could see further downside as the weekly charts are ugly but we’ve advised clients to move to the sidelines for now. A common conversation we’re having with clients is why it may make sense to hedge sizeable stock positions via index futures and or options. Contact us for more specifics. The 100 day MA in gold continues to cap further upside. As long as prices remain below $1710 we see new lows in the coming weeks. I’ll have to re-evaluate next week but I think $1625/1635 is possible. The $2 wild trading range continues in silver as traders try to play the tug of war for control. If we cannot get above $33.50 in the next few sessions I see $29 by the first week of December…in my opinion. WOW…the dollar broke out today gaining just better than 1% to two month highs. All crosses were hit with the Euro and Aussie falling the hardest. We like bearish exposure in the Yen but outside of that risk/reward we see no viable trades in forex. Aggressive traders can gain short exposure in March coffee with stops just above the 50 day MA. We may be a bit early but we like scaling into longs in March cocoa looking to add to the trade once prices are back above 2500. Continue to play the short end of the curve via 2013 Euro-dollars. Trail stops and let the trade work we are in this one for the long haul. Grains were lower by 1-3% today with the entire complex in the red with the exception of rice. On a bounce we would be looking to re-establish shorts with clients. We remain on the sidelines with clients looking for a lower long entry in live cattle. Lena hogs remain in bull mode but as previously stated on a trade above 92.00 in February book profits on longs as we’re approaching overbought 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.

Corrections Underway 11/17/11

Matthew Bradbard — Thu, 17 Nov 2011 21:47:22 +0000

Stocks and commodities got hit today and there should be more to follow. Stocks, energies , Ag even metals were not spared as Risk OFF was the theme today. Crude failed to make it to higher ground as prices were rejected and the reversal that we’ve been expecting may finally be under way. Aggressive clients started to gain bearish exposure in January contracts. As of this post oil is down 3.7% trading back under $100/barrel. If the 9 day MA gives way expect a trade back to the 38.2% Fibonacci retracement at $92.40 next week. Further pressure in the distillates should drop RBOB under $2.40 and heating oil under $2.90. Natural gas is showing signs of life when all other commodities are getting hit. A 3% advance today could be a sign of price stabilization. Stay tuned as we may be suggesting longs in the very near future. Stocks continued lower building on the losses late yesterday. On a breach of the 50 day MA’s expect selling to intensify. Those levels are 1200 in the S&P and 11450 in the Dow. Gold will close down nearly 3% dragging prices to two week lows and on the verge of breaking $1700/ounce as we forecast. If we break the 100 day MA with ease in the next few sessions do not rule out a quick trade to $1660 in December. Silver gave up 6.4% closing below the 40 day MA for the first time in two weeks as prices approach our target at $30/ounce. At this juncture we cannot rule out a sub $28 trade…trade accordingly. Again today’s theme was a higher dollar and lower crosses with the commodity currencies getting hit the hardest. On further commodity pressure expect this to continue. Aggressive traders could have short exposure with any of the int’l pairs. My only suggestion is have an exit strategy in case of a reversal because the volatility in currencies can be massive. Continue to trail stops on bearish sugar trades. The short end of the curve remains on our bearish radar as 2013 Euro-dollar contracts are in our opinion the way to play this complex. Agriculture resumed its downward movement with corn down 4.4%, soybeans 1.6% and wheat just under 4%. Aggressive traders can be positioned bearishly though we do advise a smaller allocation as this should be one of the first commodity sector to bottom. Those typically trading multiple positions are advised to trim their size. Live cattle appears to be working its way lower…wait for a trade back near $1.21 in February before gaining long exposure…stay tuned. The bulls are back in control in hogs with prices closing above the 20 day MA in February for the first time in three weeks. We have advanced 3.5% in the last week and we feel we could see an additional 3-5% 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

Commodity Update 11/10/11

Matthew Bradbard — Thu, 10 Nov 2011 21:32:33 +0000

Crude continues to work higher…my suggestion is cover shorts until there is evidence of a top. Are prices to high…yes but we could advance $3-5 more and we’ve had enough pain. The weakness in RBOB has been the drag as even in the face of rising Crude oil RBOB has declined over 10 cents in the last three sessions. Natural gas remains the dog in this sector…refrain from picking a bottom! Stocks failed to follow through retracing about 1/3 of yesterday’s losses. We remain cautiously bearish with clients expecting lower ground yet. Metals appear to be heading south at least in the short run with gold down over $30/ounce and silver giving up 30 cents. We see gold below $1700 and have no interest in approaching longs until that happens with our clients…current price $1760. On its lows silver approached the 40 day MA; level that has supported for the last week. On a breach of $33.15 do not rule out a trade back to $30/ounce. Clients have no exposure but we are mildly bearish at this moment. Copper has lost ground for the last five sessions and is down over 40 cents/lb. in the last two weeks. If this continues we could see the $3 level challenged by December. Mixed bag in forex today…buyer and seller beware as there are no clear signals. Some clients remain in their bearish Yen plays but if we do not see a breakdown very soon we will be cutting their losses. Cocoa is lower by 7% in the last three sessions dragging prices to contract lows. We do not suggest catching this falling knife but another 5-8% decline would make one hell of a buy…in my opinion. Whipsaw continues on the long end of the curve…the more appropriate play is shorting the short end …in long dated Euro-dollars. Agriculture fell apart today as bears are clearly in control. Corn and soybeans were lower by 1.5% while wheat gave up nearly 4%. Aggressive traders could have short exposure in any of the aforementioned grains. Live cattle broke the 20 day MA trading lower now for the last five sessions. Lean hogs finished higher but well off their early dealings. As mentioned yesterday we favor working into bullish trades here thinking an interim low is in…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.

Out of Treasuries into Commods/Stocks 7/7/11

Matthew Bradbard — Thu, 07 Jul 2011 20:12:56 +0000

Crude powers through the 40 day MA closing at three week highs just under $99/barrel in August. We maintain a $103 target and continuing at the current up pace prices should reach that level by this time next week. The 2% surge in Crude was dwarfed by the strength in the distillates with RBOB higher by 4% and heating oil higher by 4.4%…talk about the tail wagging the dog. Natural gas lost just over 1% after trading at four month lows on what we view as an overreaction to today’s’ AGA. Note prices did close 10 cents off their lows. We advised those holding September bull cal spreads from higher levels to buy back their top legs today. Stocks remain overbought but after today’s activity prices have advanced to two month highs. We’ve been selling into this strength buying September bear put spreads for clients BUT if we get above the May highs we may leave the trade at a loss…stay tuned. The 7% rally has been on light volume and in our opinion too much too fast. The standouts in the currency complex remain the commodity currencies; the Aussie , Kiwi and Loonie . Our pick remains the Loonie as a settlement above 1.0415 should signal 1.0500 in September. Lean hogs sentiment shifted back to bullish with the settlement back above the 20 day MA today, in August at 94.25. Use that level as your pivot point as we will likely be buying dips for clients. Live cattle cleared the upside resistance and though we have no current exposure we will likely see higher pricing. We will not partake though as we see better risk/reward opportunities elsewhere. Gold finished in positive territory but was unable to take out the previous day’s high. It should just be a matter of time as we feel a $30-40 move higher is imminent…trade accordingly. Silver advanced 1.5% picking up just over $2.50/ounce in the last three sessions. We like the chart pattern and feel we could see a 5% surge in the coming week or so…trade accordingly. Sugar is pushing 30 cents/lb making it a near 50% advance in the last two months…OUCH for our clients shorts. Futures move south from here or we will likely take a pretty heavy hit…stay tuned. Today we bought back clients puts with the expectation of prices turning on a dime any day now. If cocoa challenges the recent highs we will try to liquidate our clients remaining longs tomorrow. Agriculture is a buy…corn, soybean and wheat in my opinion. Today’s activity December corn gained 1%, September wheat 1.2% and November soybeans picked up 1.45%. An additional play could be soybean oil which should benefit from the appreciation in soybeans and Crude oil. Notice the correlation in recent months. Past performance is not indicative of future results. Money appears to be flowing out of the perceived safe haven “Treasury complex” with 30-yr bonds, 10-yr notes and Euro-dollars all trading lower. At this juncture looking at the risk/reward we suggest the short end of the curve i.e. longer dated Euro-dollars …December 2012 for example.

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

Luck of the Irish 3/17/11

Matthew Bradbard — Thu, 17 Mar 2011 20:23:03 +0000

Sometimes in trading I would take luck over talent. It boils down sometimes going with your gut as technical and fundamental research are necessary tools, they alone do not insure success in trading. Crude is back above the 20 day MA advancing 3.5% today. Buy dips as we anticipate a trade over $105 in May in the coming weeks. Call it short covering or perhaps as a result of a bigger draw in today’s AGA report but natural gas was higher by 5.5% trading within 1 penny of our target at $4.25. Hitting a six week high was good enough for us to book profits with clients. We see the 100 day MA at $4.25 as resistance and see support at the 20 day MA at $4.00.The 100 day MA has supported the indices now for three days running. We favor buying dips and expect a 2.5-4% rally from here. After a 8% advance in five sessions we are prepared to reverse the trade in the Yen…exit longs at a profit and get short. We advised aggressive clients to purchase bearish ratio spreads to capitalize on a retracement back near 1.2400 in June futures. The Euro and Pound also are sales at these levels in our opinion. Positive trade in lean hogs and live cattle which are both buys; we suggest gaining bullish exposure in June contracts with respective targets at 102.00 and 118.00. The picture is unclear for us in silver so we would tighten stops or move to the sidelines. As for gold aggressive traders can buy with stops below the recent lows. Our advice is April futures or purchasing June call spreads. Softs got a bounce today but we continue to feel this will be the weakest performing sector so pick your points for bearish trading opportunities. Ideally you used the recent set back to buy agriculture because we should trade north from here. Today corn was higher by nearly 5%, soybeans 3.75% and wheat over 7%. Clients are long corn and wheat via futures and options and still own soybean spreads that should fight back on this advance. Traders willing to weather some volatility could venture back into NOB spreads (short 30-yr bonds /long 10-yr notes). Or play the short end of the curve with bearish plays on long dated Euro-dollar 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.

Ready for Turkey 11/24/10

Matthew Bradbard — Wed, 24 Nov 2010 20:50:38 +0000

Through the 50 day MA in Crude today as predicted gaining 3.4% as of this post. Clients have been advised to establish longs in recent sessions looking for this exact move. Our suggestion remains buy dips in either January futures or February options. As Crude appreciates so should the distillates; heating oil and RBOB were higher by 3.50-4% in today’s session. Seven out of the last eight sessions natural gas has been a winner. We still expect more upside and would be a buyer of 15-20 cent dips. Up…down up…down I cannot make heads or tails of the equity market. Move to the sidelines as the indices are bi-polar unless of course you are a day trader…which I do not claim to be. Bulls remain in the driver’s seat in the livestock sector but we’ve moved an awful lot in a short time frame so scale out of longs at a profit and tighten up stops. Looking at the debt complex all I see is RED today from the long end of the curve to the short end. Next week I will be fading rallies in Euro-dollars for clients establishing bearish plays in ’11 contracts in futures and options…stay tuned. We’ve advised clients to lighten up on their gold and silver positions as we do not like the indecision in recent sessions. That does not mean we’re are bullish or bearish it just means we’re exercising money management and cashing out for most clients. Once we get a clearer picture likely next week we will have fresh trading recommendations. The recent correction in corn (12-15%), soybeans (10-13%) and wheat (14-17%) should have been bought. Our pick of the litter is corn as we feel an interim low was established this week. We’re suggesting bullish options and futures exposure looking for a trade back above $6/bushel in the coming weeks. Sugar advanced 2.25% today…another 2-3% and our clients will be looking to unload their longs. The trend line mentioned in previous post held with cotton gaining 5.5% today. Clients have NO exposure.

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 Fed is the 800 lb. Donkey 12/15/9

Matthew Bradbard — Tue, 15 Dec 2009 20:41:28 +0000

A hush came over the commodity market until FOMC decision. The streak has ended at 9 days with Crude pushing higher today by just less than 2%. We are fairly confident that an interim bottom was established yesterday; $68.59 in the January contract. We have clients long via March $5 call spreads expecting a $5-7 advance in the coming weeks. Natural gas has experienced a reversal of fortune and as opposed to a sell rallies market it has become a buy dips market. We will wait till 2010 to look for opportunities as we have no exposure with clients and are not comfortable in natural gas when we are away. The 25% advance in less than 2 weeks may be too much…be cautious with longs. Sugar may set back temporarily as it experienced a violent reversal today. Trail stops on futures, clients were advised to exit their March options but we advised to hold May option exposure. We expect more upside after the shakeout. Sell rallies in cocoa, we think a trade 7-10% lower is in order. Continue to play the break out in equities. We do expect a 10% correction at some juncture but we’re unwilling to place a wager for clients at this time. If recent lows in metals hold we like being long; March silver at $16.90 and February gold at $1110. A potential triple bottom in gold close to that level which could act as solid support is prices started the next leg up. Do not over commit capital…scale into longs. Corn is having trouble breaking the 20 day moving average to the upside. On that expect $4.25 and the $4.50 in March BUT if we start to roll over be willing to give back 30 cents in the futures, If unwilling tighten stops or start to look for an exit. Little change in the NOB spread today, hold the position… we think we’ve seen the worst. We continue to advise clients to scale in to short exposure in long dated Euro-dollars via futures and options. Live cattle are convincingly above the 20 day moving average and closed above the down trend line form early November. We have clients long February expecting more upside. The brutal cold weather should support a further advance. On a trade back near 88 cents we would start looking for an exit scaling out of the trade for clients. US Dollar up ahead of tomorrows FOMC decision. A clear break out in the Greenback but without confirmation on higher rates it could be short lived. Continue to sell rallies in the Cable and Euro-currency. The yen longs we hinted at are too aggressive; we suggesting taking no action.

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

Do Fundamentals matter? 6/9/9

Matthew Bradbard — Tue, 09 Jun 2009 19:14:45 +0000

Oil is above $70 making a new contract high having appreciated some 40% since the beginning of May. We feel you are late to the party if you don’t already have long exposure though we’ll be looking at getting long on a setback if we ever get one?? Ou pick in the energy sector remains natural gas; the ratio to crude oil is at the widest margin since 91′. We maintain a $5 target in the next 2/3 months. Contact us on positioning with futures and/or options. The dollar has resumed its move lower with currencies moving higher. We are thankful we advised clients to book profits on their short Loonie yesterday. Trade idea in yen today; buy July 102 1/2-105 1/2 call spreads at 110 points or $1,375…target $2,000. Still waiting for the correction in agricuture , have some patience. Euro-dollars are set too rally in the short term, use this rally to get short. Trail stops down on open positions to protect profits. Gold and silver were higher, we are lightly working long again for clients but still believe we could get a deeper correction so keep some dry powder. One of our livestock CTA’s suggested a trade today that we acted on; long August live cattle/short October live cattle @ -550. Expect this spread to narrow in coming weeks. What we like the most is a 3:1 risk/reward ratio, those our our expectations.

US dollar to rally temporarily 6/5/9

Matthew Bradbard — Fri, 05 Jun 2009 20:46:08 +0000

Natural gas is a BUY, we expect a sizeable move not today or tomorrow but over the next 3 months we anticipate a trade up to $5. Contact us if you agree so you can attempt to take advantage of this. US dollar higher by 130 points with all the major currencies getting hit..can I say I told you so! Agriculture was lower today but higher on the week; we are still short beans and looking for a break in others to be a buyer between now and the 30th USDA report. Gold and silver were lower by $26 and 65 cents respectively. We expect lower prices short term but will be an agressive buyer very soon. We will look to be scaling into longs near $915/900 and $14/13.50. Sugar was the only soft higher, we advised buying yesteday and today to clients. Coffee and cotton were lower as we predicted. Look to be a buyer near 50 cents in cotton and 127 in coffee. We will save the best for last….Euro-dollars were lower by 20 -40 points depending on the contract. If you have not read our Eur0-dollar report yet we suggest you do. http://www.mbwealth.com/articles/eurodollar.pdf

Does Month end matter any more ? 5/29/9

Matthew Bradbard — Fri, 29 May 2009 19:32:46 +0000

After a monster month commodities held their ground with a number of commodities making new highs. Crude oil up every day this week, fast approaching $70. A correction in oil and RBOB is over due but will it happen? Traders not willing to trade futures or sell options we advised to buy August $4.50/5.50 call spreads for $2000 on natural gas. Is the dollar doomed? All currencies advanced! Traders who took our advice taking a stab at shorting the Pound were stopped out at a loss again, should have been roughly $600/700 per contract. All int’l currencies that we trade with the exception of the yen printed new 09′ highs. However we did advise a long yen play in recent blogs; July 105/108 call spread at $1000. Gold and silver appear unstopable. Diversify your holdings…the new flight to quality seems to be precious metals. The fact they didn ‘t break at all on month end is very telling. We’re currently losing money in the June lean hog calls in a very light postion, outside of that no real interest in livestock currently. Equities look like they are due for a break but looks can be deceiving. When will the next shoe drop? Fade this rally in treasuries and Euro-dollars.