Commodity Update: Silver Gains 5.41%

has gained for the last 5 days but based on the outside markets yesterday a falling greenback and metals soaring I would have expected more upside. Maybe, just maybe, bearish traders will be rewarded in the coming sessions. I still like bearish trade expecting a trade back to the 50 day MA in the coming weeks. The September crack spread got within about 1/2 cent from my desired entry before prices turned around. Natural gas gained 2.62% closing above its 18 day MA and inching closer to the gap formed in late July. I’ve suggested bullish trade in October and November to clients.

Stock Indices: Risk off yesterday with the S&P at its lows, as of this post down 1.55% and 4 points from its 50 day MA. A trade under that level I feel the next stop is the 100 day MA which in September futures comes in at 1623. The Dow is getting roped trading lower by nearly 250 points and well below its 50 day MA. The 100 day MA and next support level is seen at 15000. Did investors with large portfolios heed my advice and book profit in their stock portfolio? Did anyone establish downside hedges?

Metals: Gold advanced by 2.41% lifting futures to their highest trade since 6/19. The next upside target is the 100 day MA approximately $20/ounce above current trade. Under the market the 50 day MA should act as support and as long as futures remain above that pivot point the sentiment will remain bullish. In my opinion those in bullish trade should lighten up on a probe above $1400 and on this leg I think it unlikely to see a trade north of $1435; which serves as the 38.2% Fibonacci level. Wow…silver gained 5.41% to close above its 100 day MA and the highest trade since 5/22. My take is prices have gotten ahead of themselves and a 20% plus move in 7 days is not justified. Some larger clients opted to fade this rally with December futures but that is extremely risky. My favored play would be to buy what I call lottery tickets. Some clients bought September $20 puts today for $175 per option. We are willing to risk the entire premium and likely will expire worthless BUT if silver corrects in the coming week we could see 3-5:1 return…hence the whole lottery ticket analogy.

Softs: Higher trade was once again rejected in cocoa closing over $50 off its highs even in the face of a rising Pound and falling dollar. I like the idea of buying October puts though I started pricing out bearish trades in December today for clients…stay tuned. Sugar backed off slightly closing just under its 40 day MA. I am looking to buy a 2-3% dip in 14’ contracts for clients. Yesterday’s chart of the day was cotton which has closed higher 6 out of the last 8 sessions advancing 8% within that time frame. I’ve suggested working into bearish trade at these elevated prices anticipating a trade back to 85/86 cents in December futures. OJ traded lower but held the $130 level. Traders should be working into bullish trade with tight stops. Coffee closed better than 2 cents off its lows but failed to get above its 50 day MA which was today’s high of the day. I’d like to see front month futures back above $123 to be comfortable in my client’s bullish trades. I’ve suggested long December futures with an options leg for protection.

Treasuries: 30-yr bonds were back on the defensive trading lower by ½ point and posting fresh 13’ lows. Bearish sentiment exists until we trade north of the 9 and 20 day MA. Though 10-yr notes closed well off their lows, futures did end in the red making it the third session in the last four where futures gave up ground. Lower trade looks likely and like 30-yr bonds as long as futures remain under their 9 and 20 day MAs I am in the bear camp. I am sure I sound like a broken record but bearish exposure in 16’ Eurodollar contracts may be the best risk/reward trade on my screen. Yesterday March 16’ contracts closed at their lowest levels since 7/10. Build a position in this trade ahead of next month FOMC.

Livestock: The price action in live cattle the last three sessions is hinting at an interim top. A 50% Fibonacci retracement would put October under $125…trade accordingly. On a fresh high I think it would be wise to cut losses if willing to probe bearish trade. Inside day in lean hogs with October futures lower by nearly 1%. We may be ready to roll over but trying to pick a top has been costly for clients so I have no bearish/bullish exposure until I get a clearer picture.

Grains: December corn gained 3.73 to not only close above its 9 day MA but also clear the 18 day MA. This market has shifted from a sell rallies market to a buy dips market. My upside objective in this contract is $4.95/5.00. November soybeans completed a 61.8% Fibonacci retracement to the penny trading to $12.65/bushel today. I will be looking to sell from a little higher level. If any farmers are reading this I would take this opportunity to sell some crop after the $1 rally we experienced in the last 6 days. December soybean oil gained 1.92% to settle at its 38.2% Fibonacci level and above its 18 day MA. Those that sold 44 puts should be in a profit and be looking to offset (buy back) on higher trade. December wheat probed its 9 day MA but failed to clear that hurdle. Until that happens refrain from picking a bottom. Once it happens look for a trade back to the 50 day MA near $6.75/6.80.

Currencies: The dollar again failed at its 20 day MA only to reverse and lose 0.67% on the day. Do not rule out a challenge of the June lows though I feel the easy money has been made on any bearish trade. All crosses traded higher…the Swiss and pound the two standouts. Close out bearish trade in the euro and Swiss at a small loss. Those in option trades in the Pound were advised to buy back their top leg and open up the trade, consider taking partial profits on 1 leg and now they are looking for lower trade to manage the remainder of the position. We opted to buy back our $153 puts for approximately $150 per, slightly increasing our exposure. Mixed signals in the commodity currencies so stand aside for now.

Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.