Commodity Update: Gold Picking Up

For the last two sessions Crude oil has put in higher highs and higher lows. On the highs prices probed the 18 day MA. I am not opposed to lightly probing bullish plays…the suggested strategy is long futures while selling out of the money calls 1:1 in July. RBOB is almost 10 cents off its lows for last week and could get legs from here as I do not see significant resistance for 7-10 cents overhead. There is plenty of risk trading energies but weighing risk/reward I see heating oil as the most attractive play currently. I like bullish exposure thinking we see 10-15 cents appreciation from current trade. Natural gas was lower but held at the 8 day MA off by 2.6% the last two sessions. Lower trade is anticipated but I have no current client exposure …$3.70 is my objective in May.

Stock Indices: The S&P traded to new highs but failed to close at those levels gaining just 0.25%. Until we get back under the 9 day MA we may trade higher but I will not be involved. My advice remains establish downside hedges…see previous posts. The Dow closed at a record high but I refuse to bet on this horse.

Metals: Gold picked up 0.90% closing at a one week high and it appears poised to trade above the down sloping trend line $10 overhead. I see the 50 day MA at $1610 in June as the next logical stop. My favored play is long futures and selling out of the money calls 1:1. May silver futures were higher by 2.74% closing just under their down sloping trend line mentioned in previous posts. A trade above $28 should lead to further short covering and a trade back near $29 in my opinion. On that I will look to lighten up and manage my client’s current open longs. The move in the last week in copper futures is significant and should not be ignored as May is almost 15 cents off last week’s lows and a key reversal may be in the making …stay tuned.

Softs: On the 1.56% advance today cocoa prices are trading at two month highs. 2300 remains my fist objective in May futures. Sugar is a dog and I see far better plays elsewhere. Cotton has completed a 38.2% Fibonacci retracement dragging prices to five weeks lows. Support under 84.50 comes in at 82 cents in May. $133-135 is a buy window in coffee in my eyes.

Treasuries: Short term I would say 30-yr bonds and 10-yr notes are headed lower. NOB spreads are the trade; short bonds and long notes 1:1. Continue to fade the rally in long dated Eurodollars. Futures are overbought and very close to their contract highs…stops can be above the highs in November for those wanting to manage their risk.

Livestock: Until beef trades lower I would stand aside as I am interested in longs in either feeder cattle or live cattle but from lower levels. Lean hogs are expected to trade lower as long as prices remain under their 20 and 9 day MAs; in June at 90.30 and 91.00 respectively.

Grains: Oats…yes I had for breakfast and featured in my chart of the day. Is the Ag complex a buy…according to oats upside is to follow? Oats have gained for the last these sessions and could be in the first inning of a move back above $4. New crop corn appreciated 1.55% closing at its 9 day MA…a buy. Sell puts, buy calls or get long futures. Soybeans closed above the 9 day MA for the first time since the USDA report last week… a bullish signal. I still prefer July soybean meal which gained slightly today but more should follow. Wheat failed at its 18 day MA trading slightly lower. I still like the prospect of higher ground and remain friendly.

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