RCM Commodity Update: Smallest Trading Range In Weeks In Crude Oil

The smallest trading range in weeks in Crude oil with a marginal positive close. The 50 day MA capped upside at least on a closing basis. I lean to the short side thinking we see a $2-3 retracement from current levels. With Crude moving lower the current “crack spread” some aggressive clients are in should pan out…long July Heating oil/short July RBOB. Current price is 300 and I am targeting a trade near 650-700 this week or next. Natural gas has gone nowhere in the last three sessions but could a base be establishing? I feel it is worth a long probe with stops under the 100 day MA looking for 20-30 cents of upside.

Stock Indices: The Nikkei gave up 4.82% closing under 13000 for the first time since 4/3. A 38.2% Fibonacci retracement is complete, from here the 100 day MA should be challenged, in June futures at 12690. US markets also followed suit with the S&P getting within spitting distance of 1600 closing down 1.43%. The Dow is under 15000, the first close under that pivot point in 4 weeks. More deprecation is around the bend in my eyes as this is the long awaited correction in my opinion. The 50 day MA and then the 100 day MA just like the Nikkei should be used as guidance. NFP # out Friday…a hedge anyone?

Metals: The 20 day MA has capped upside the last 5 days in gold but do not throw in the towel as I think there is still hope for an upside advance. I maintain $1450/1460 can be achieved in the coming weeks. My suggested play is buying August option premium. I would change my mind only on a penetration of $1370. Similar tune in silver with the 20 day MA acting as a stiff barrier. Underneath $22 continues to act as a floor. It has been like watching paint dry of late in silver but do not let this market fool you one day a sleeping giant will awake and we will see a $2 move - the question is what direction? I prefer gold and have no short term opinion in silver...play the breakout.

Softs: Cocoa in the green again gaining 1.10% to close above its 50 day MA. Another $50-70 my objectives are reached so exit stage left. I’m pricing out bearish option strategies in cotton after the recent 7.5% advance…stay tuned. Add bearish plays in OJ to your radar as well. I should have ideas in the coming sessions. In the last 7 trading session coffee has been in a nickel trading range...a solid base…getting ready for lift off? I’m suggesting accumulating bullish plays in September and December coffee. A close above the recent trading range could be followed by a volatile surge to the 50 day MA, currently a dime above Wednesday’s settlement…trade accordingly.

Treasuries: I love it when a plan comes together! We should see a bounce in Treasuries from here. My suggestion is NOB spreads; long 30-yr bonds and short 10-yr notes. My objectives are as follows 144’00 and 131’00 in September futures. A rebound on the short end of the curve (Eurodollars) approximately 25 ticks should be enough to start fading 16’ contracts as well or buy near the money put options in my opinion. This should play out by this time next week if not sooner.

Livestock: Close out remaining live cattle longs as futures are back under their 9 and 20 day MAs. I want to have bullish exposure but I think we will get an opportunity to re-establish positions from lower levels. My bearish calls remain in lean hogs…see Tuesday’s piece with more detail. I like the idea of selling futures and also selling out of the money puts 1:1. Also one could construct a trade by either selling calls or buying puts. At the end of the day I am targeting a trade under 90 cents in August futures in the coming weeks…trade accordingly.

Grains: New crop corn is down 30 cents in the last 3 days and within a dime of filling the gap from 5/24. Remember buys should be on your radar when December is under $5.35/bushel. On a big move lower in the coming sessions I would be willing to sell $5 put if we can collect around 35 cents. New crop soybeans have started to trade lower will old crop also back off? August futures have gained roughly 25 cents since I advised $1 bear put spreads…clients are under water but I still like the trade. On fresh entries potentially bump your strike prices up a bit. I think August could trade $13.50-13.70 sometime in June/July. Unfortunately the baby (wheat) was thrown out with the bath water as most Agricultural products were hit today. Wheat gave up 1.23% closing at its 20 day MA. $7.18 will need to hold in December for my short term bullishness to continue. On a breach expect lower trade with a potential fall back near $7/bushel.

Currencies: The US dollar is off 4 out of the last 6 sessions and as long as we remain under the 50 day MA I am bearish - that level in June is 82.98, call it 83. The Euro, Swiss and Pound should continue to gain…my only reservation is one may want to trim their size if in a winning trade as the ECB and BoE meet Thursday early AM. Once again the Yen was unable to break above the 50 day MA. If it fails to do so Wednesday cut your bullish positions in half. All commodity currencies were hit with the Aussie hit the hardest down greater than 1%. We are close to our pain threshold on bullish plays. One of my colleagues did find some very supportive seasonal patterns but even if it has worked year after year this year circumstances are unique so take that data with a grain of salt.

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.