RCM Commodity Update: Gold Trading At Its Highest Level Since Mid May

gained 1% today but it was less about bullish activity in energy and more about the route in the US dollar and other outside market influence. Some clients remained in their bearish trades but will likely cut losses on additional upside. They are short August futures and long out of the money August calls as a hedge. As of this post the July heating oil/RBOB spread was hit for just better than 1 penny or $420 against my clients per spread...stay the course for now. This particular spread appears to perform the best when Crude is trading lower…plan accordingly. Natural gas gave up almost 4% breaking the 100 day MA on the downside for the first time since 3/7. Those probing longs should have been stopped out at a 7-10 cent loss depending on stop placement. Step aside for now.

Stock Indices: The 50 day MA was tested in both the Dow and the S&P but we reversed from just under those levels with the Dow 150 or so points above that pivot point while the S&P added over 20 points. All eyes tomorrow will be on the jobs number. While we have intra-day corrected 5% I’m not convinced we have seen enough…stay tuned. Do not rule out another 50 points off today’s S&P lows and a further 400 points in the Dow. The Nikkei did find it’s footing closing just above the 100 day MA but still in the last 3 weeks H/L a 23% plunge.

Metals: Gold picked up 1% trading at its highest level since 5/15 running into resistance at its 40 day MA. I would have liked to see more acceleration with the drop in the dollar but does that relationship matter anymore? I’ve moved my support line in August futures up to $1385…as for upside I still think we could see trade back to the May consolidation level $50-60 from current trade. My suggestion is August bullish option strategies trying to capitalize. When gold moves up/down 1% in normal circumstances silver would move in the same direction 2% but instead it gained 50% of what gold did today as opposed to 200%. We likely will seem some type of mean reversion...silver trade higher or gold lower tomorrow. We still must take out the 20 day MA in July silver currently at $22.60 to see increased buying interest. Gold remains my preferred vehicle.

Softs: My objectives were achieved in cocoa with a 2.38% gain today. My suggestion is take a majority of your position off as profits came quicker than I had anticipated - trust me I’m not complaining. Futures jumped nearly 8% in 4 days. Sugar in the green for the first time in 8 sessions…a small victory. I am not calling a bottom but she has my attention. If cotton fails to get above its 50 & 100 day MAs just above current trade the next few days I will likely probe bearish trades next week…stay tuned. On the heaviest volume day in the last 10 days coffee futures gained 1.57% near the upper end of the recent trading range. I continue to like accumulating bullish trade in September and December.

Treasuries: Treasuries where higher today and 3 out of the last 4 sessions but futures closed well off their highs today. The correction came as the Stock market found its footing bouncing off its 50 day MA. It sounds like a broken record but I think 30-yr bonds can see 144’00 and 10-yr notes 130’16 in the coming weeks. If the short end of the curve is also lifted higher as most boats do rise when the tides shift let’s look to sell 16’ Eurodollar futures from higher levels in and purchase put options.

Livestock: For the last 8 trading days live cattle futures have been in a 1.5 cent trading range not wandering far from their 9 and 20 day MA. I advised clients of late to close out bullish trade in August at a small loss. Lean hogs gained 0.88% to trade to fresh 4 month highs. Depending on stop placement fresh bearish probes may have been stopped out. My clients that chose to get in this trade are short August futures and they sold out of the money puts 1:1 allowing just under a 2 cent cushion. Not the best first day in a bearish trade but we still like the position. A prospective client called me today that had in my estimation too large of a short on in hogs. Risk management is critical in this game and if you are feeling pain and you still like the trade…trim your position size, put a hard stop to walk away or use options to lighten the load if the trade is against you. A deer in the headlights does not work…just ask Bambi!

Grains: New crop corn bounced off its 20 day MA to gain better than 1%. I am searching for a fill of the gap from 5/24…stay tuned. The overnight low got within a nickel of closing that gap but will that be it before a run higher resumes? At the moment I am in cash looking for a buy signal at lower levels. August soybeans have closed lower 3 out of the last 3 sessions. Is an interim top being established? A settlement under the 9 day MA could confirm this, currently at $14.38. I think futures could crack better than 50 cents/bushel. Wheat has lost ground the last 3 sessions probing its 50 day MA today and closing just under the 20 day. Some clients are in bullish trade and though may take heat short term we will stay long for now thinking the profit potential outweighs the downside risk.

Currencies: June options expiration tomorrow. I know the 4th of July is not for another month but wowzers some fireworks in the FX market today. All you dollar bulls, markets do not move in a straight line. The greenback is lower by 3.5% in the last 3 weeks and on its lows completed a 61.8% Fibonacci retracement. The easy money on bearish trades has been made...trail stops. All European majors (Euro, Swiss and Pound) were up approximately 1.3%. More upside should play out but not at such a feverish pace in my opinion. The Yen jumped 2% lifting futures to 2 ½ month highs. Long premium depending on your strike should have been rewarded. The Loonie and Aussie are starting to move off what I think should be stiff support, an overnight reversal in the Aussie closing 175 ticks off lows and the Loonie 99 ticks off its lows finishing at its 20 day MA. Buy dips!

Risk 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.