Commodity Update: August 8, 2013

On is lows Crude oil was down over $2 today but losses were pared and as of this post futures are only off 60 cents. As long as futures remain under their 8 and 18 day MA I am in the bear camp. I did lighten up on some client’s shorts today and will look to be a seller overnight or tomorrow ideally at slightly higher trade. Two fresh entries today one in the products trading the crack spread and the other in more buys in natural gas. Today’s chart of the day was natural gas…read today’s piece to explore further. I’m trading the other direction in the crack then I have of late with clients …I opted to buy RBOB and sell heating oil. It appears RBOB should at least see a bounce off its 61.8% Fib level and 100 day MA, they comes in just above $2.83. The 100 day MA is around the same level as the 50% fib level in heat. Clients are in round a dime and we are looking for a stab at 300-400 points in the next week. A key reversal in natural gas 6.4% off its 13’ lows made today as of this post. I continue to like back ratio spreads in October and November and long futures in November against a sale of $3.50 calls 1:1.

Stock Indices: A higher low and higher high in the S&P today to close higher on the day after erasing morning losses. 1700 remains the line in the sand with futures approximately $5 under that level. I think you are safe being in bearish trade with stops just above the recent highs. Just over a 150 point range in the Dow on the session closing virtually unchanged. I’d expect a sideways to down grind in the coming sessions.

Metals: Gold picked up 1.91% closing above its 20 day MA and just under its 50 day MA. A trade north of $1316 would convince me I was wrong on my assessment that lower trade was coming and would get me interested in bullish trade again for clients. Silver was higher by 3.51% to close just under its 50 day MA approx 20 cents from current trade. This is a key pivot level as futures have not been above the 50 day MA since February when prices were north of $30/ounce. Technically speak on a breakout north metals are set up to trade higher I just am to a believer yet. Other major movers in this sector were copper breaking above resistance today adding 3.07% lifting prices to 2 month highs. As I’ve said a settlement above $3.17 we should see $3.30 in quick order and we are only 3 cents away as of this post. The standout was platinum on news of problems in South Africa we gained 3.71% lifting futures to 2 ½ month highs. We have not been above $1500 since mid-June and that looks likely tomorrow.

Softs: Cocoa added nearly 1% today finishing in the green for the last 4 sessions but we closed just about $50 off highs as trades above $2500 were rejected. I think probing bearish trades by purchasing put options is the play. Sugar a slight galena adding to yesterdays 1.39% appreciation. Support is seen at the 50 day MA followed by the 20 day MA. The potential freeze in SA could be a game changer over the weekend so pay attention to the weather. OJ was higher for most of the session but did fail in late dealings to close in the red once again. I like bearish trades in November expecting an additional 5-10 cents of depreciation. Coffee gained 0.83% to challenge its 50 day MA on its highs. Short term it’s all about the Brazilian weather, with or without a freeze I’ve suggested long futures in December with options protection. Obviously with a freeze we arrive at our target sooner…trade accordingly.

Treasuries: 30-yr bonds probed the 20 day MA finishing just below that pivot point. A close above 134’8 should lead to a 136’00 trade in my opinion. 10-yr notes finished higher for4 out of the last 5 sessions and have printed a higher high and higher low the last 3 sessions. As long as futures are supported at 126’12 I am in the bull camp with a first objective of 127’16. Scale into bearish trade in the Eurodollar. I know I sound like a broken record but my favored strategy is short 16’ futures and then buys calls 1:1. The idea is to have a manageable position on ahead of the next FOMC meeting…5 weeks out from today.

Livestock: Tyson…not Mike Tyson but Tyson foods made a market moving announcement today in the cattle market. They are a major player in the beef market and may set a precedent for other players to follow suit. Tyson announced they will no longer accept cattle fed Zilmax, a feed additive that boosts weight gain. October live cattle gained nearly 2% trading above the previous resistance and lifting futures to their highest trade since early April. I’d be willing to explore bullish trade for clients on a setback of 2%. Inside day in lean hogs that has found support at its 20 day MA the last 2 sessions. A penetration of 85 cents should get this market headed south again. My favored play is short October futures with options protection. Based on client losses in August contracts I’d prefer to buy calls then sell puts.

Grains: USDA report out Monday 8/12 A moment of silence well if you are reading aloud take a pause corn actually was positive today albeit only 1’4 cents. I still would like to see a settlement above the 9 day MA before taking a position with clients but it would appear we have a support level in December at $4.55/bushel. The 9 day MA comes in at $466’4. Soybeans caught a bid closing higher by 1.59% and probing the 9 day MA on the highs. A settlement above $1189’2 a nickel above current trade gets me interested in bullish trade. Soybean oil continues to leak lower but I do not think these deflated levels are sustainable. I like selling in the money puts in December anticipating we get a rally in the coming weeks. Inside day in wheat closing lower the last two days. I do not have a lot of conviction therefore a small position with clients but I like probing bullish trade with stops just under the recent lows. It will take a trade over the 9 day MA to convince me that I’m properly positioned. In this contract that pivot point is $664’6.

Currencies: For the last 5 days the wave has been lower in the greenback with futures probing 81 for the first time since 6/19. I think we are very close to an inflection point. I am looking for a trade north of 82 before we see 80…perhaps in the coming weeks. Bearish trades in the Euro and Swiss should be out at loss and licking there wounds. The Pound is still against clients but I was reassured today with the lack of follow through after yesterdays near 1% appreciation. I still think we have a shot on our bearish option plays as I am not ruling out a trade back to $1.50 just yet. The Aussie was higher by 1.47% closing above its 20 day MA. Next upside is the 50 day MA currently at .9210. I will be absent with clients as we were too early on this trade and lost a few shekels getting out at lower levels. The Loonie jumped up to its 50% Fibonacci level, if short and in profits book them and move to the sidelines. The Yen reversed and closed in the red for the first time in 5 sessions. Book profits on bullish trades.

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