Gold, Silver Showing Signs of Interim Highs

After speaking with several prospective commodity clients yesterday I want investors to recognize that by trading ETF’s or buying stocks in a commodity sector you are not trading commodities. That being said, commodity trading is not appropriate for most investors but those financially suitable, with some risk tolerance, should explore futures, options and managed futures as a pure commodity play. Come on guys you buy your wife diamonds not cubic zirconia, right?

Crude oil lost ground yesterday, but the strange thing was the distillates were higher on the session with RBOB picking up 1% and heating higher by better than 2%. I  remain in the camp that oil should move lower until we see a settlement above $99 in the March contract. It appears we'll see higher ground in the distillates but I would suggest very small sized investments as inverse movement to Crude makes little sense and I believe the correlation will come back in line very soon. Natural gas appreciated 3% but the wild west daily movements are not for me so I am on the sidelines here with clients.

Stocks continue in bull mode and though I am not in agreement, longs stay put until we see the 9 day MAs broken. Those pivot points in the S&P and Dow are as follows: 1323 and 12680.

Gold is nearly $50 off last week’s highs and it is safe to say we hit an interim top last week. From here I suspect we see a violent $50-75 correction. Silver pared losses yesterday but it too is exhibiting signs of interim highs.  I would like to see confirmation like a settlement below $32.85 in March. There is no reason to believe that if bears temporarily jump in the driver’s seat that we could see a sub $30 trade this month. I would say we’re close to crosses rolling over and turning south but I would wait for evidence before establishing trades.

Sell a 5-7% rally in March coffee. Continue to use the 20 day MA as your pivot point when trading Treasuries; 10-yr notes and 30-yr bonds. Aggressive traders can start scaling into bearish trade in 2013 Euro-dollars with stops above their recent highs… a great risk-to-reward trade in my opinion.

Corn and soybeans were flat while wheat was higher by 1%. Continue to trail tops just under the 9 day MA on remaining longs in corn and soybeans. As for March wheat, the 9 day MA is too much give back so I would make it even tighter. Live cattle and lean hogs appear to be in the short run moving south. Longs should move to the sidelines looking  to re-position as a buyer from lower 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.