Fading the Publicity 9/22/10
Major light has been shed on the multi-decade and record highs in commodities of late…I smell a correction as when most media outlets are reporting on a commodity it is too late. Crude made a lower high and lower low trading below $74 in the November contract today on a bearish inventory report.
We doubt there is much more downside but on increased selling we could see $71/72. That level has held for all of 2010 and we expect if we get a test in the coming weeks for this support to hold. November natural gas is back above the 20 day MA closing 1.75% higher in today's session.
Our suggestion remains scaling into longs in futures and purchasing at the money call spreads. Could the indices be rolling over from over bought levels? That is the way we're positioning our clients anticipating a trade back to 1050 in the S&P and 10000 in the Dow in the coming weeks.
Sugar has been trading sideways for the last seven sessions and as long as 23.50 continues to act as resistance we think a 10-15% correction is in order. Some of our clients are in March 2011 put options and some are short futures expecting a trade back to 19/20 cents in the coming weeks.
Cotton seems to be failing at its highs the last three days. It is way too early to call a top but with prices 30-40% over the cost of production perhaps prices could correct. On further signs of an interim top we will look for bearish plays for clients. Coffee was lower by 1.61% today approaching the up-sloping trend line that has held since the June lows.
We're calling an interim top and expect more downside. Lumber is up limit for the second consecutive session…our target remains $252 in November for those still in the trade. Both 30-yr bonds and 10-yr notes are back above the 20 day MA and we expect more upside…hold off on shorts for now.
December live cattle have come off 3.4% in the last four sessions taking prices back below 99 cents. We advised clients to re-enter longs getting long futures while simultaneously selling out of the money calls as we expect the gap from Monday to be filled in the coming sessions.
Gold hits a new record high as December got within $2 of $1300/ounce. Perhaps $1300 will be obtained overnight but our clients are still waiting for a pullback before getting long. Silver gained 2.6% closing above $21/ounce for the first time in two years. Clients have cut 90% of their longs from lower levels and now wait for a correction. The 100 day MA comes in at $18.70; closer to that level we would be interested.
Based on the media publicity of late and chart patterns we're expecting a trade lower in agriculture. Aggressive traders could be short soy meal and corn. As we expressed yesterday we're anticipating 50 cents lower in corn, 70 in wheat and $1.00 in soybeans in the coming weeks. Aggressive traders could probe shorts in the Loonie and remain long the Yen while trailing stops. The US dollar hit a nine month low…use its movement to guide you in other trades.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
MB Wealth Corp. is not responsible and does not endorse anything outside of the content of this article authored by Matthew Bradbard; President of MB Wealth.
Benzinga recommends that you take a look at the CurrencyShares Japanese Yen Trust (NYSE: FXY). The FXY is an ETF that tracks the Japanese Yen. The CurrencyShares Japanese Yen Trust was down 2.94% in today's session.
