Commodities Update: Exit Natural Gas Longs and Wait for a Bottom

Crude failed to make a new high this past week, closing roughly $5 from its highs. Prices failed at the same level they did in mid-November which was followed by a choppy $10 trading range since. Will this continue? My stance is that short term we drift lower as long as $100 contains any upside. An additional influence will be if the US dollar's strength continues, expect Crude to trade lower. Exit all natural gas longs and wait for  a bottom.

I’ve seen enough damage and there are markets that can make you money until we see evidence of a bottom. I likely stayed too long since with clients and with more warm weather coming I do not  see any immediate catalyst for a turn. Equities probed the 9 day MA in early dealings but with a close back above that pivot point I remain friendly. Gold is meeting resistance at the 40 day MA but with prices only down 0.50% and based on the greenback's appreciation I would say this is a small victory for bulls. I am thinking we still have more upside with $1680 as a target. Silver ran out of gas at the 40 day MA as well.

My interpretation is the market is taking a breath before a higher leg. The dollar traded to the highest level since September 2010 last week. I see significant resistance about 1% higher so I do not expect there to be much left in the tank.

Commodity currencies look to be the best sale as prices have just started to roll over. Though the European currencies have gotten hit the hardest I view those crosses as the largest risk as big moves could happen in either direction in my opinion. Cocoa could not maintain the 50 day MA and will give back gains until the dollar stops appreciating. Move to the sidelines on longs.

10% daily ranges in OJ would have me looking elsewhere as I do not have the stomach as the moves are in both directions. Coffee gave up nearly 4% Friday as prices may not reach the 100 day MA  before they head south. Stay tuned as we may have some bearish trade recommendations this coming week. Continue to hold for a high entry on bearish euro-dollar trades.

Agriculture resumed  their downward move as forecast with corn and soybeans down roughly 2% and wheat suffering only 0.50%. As prices approach last month’s lows I want to see the price action and if support holds I may re-establish longs for clients…stay tuned.

Buy signals in lean hogs and live cattle with confirmation with both meats closing back above their respective 20 day MAs. I like the chart formation in hogs better and suggest scaling into longs in April thinking in the next 90 days we see prices back near their highs…stay tuned.

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