Off To Iowa 5/20/10
This is it for the week as we will be in Iowa tomorrow on business.
Crude has been lower 11 out of the last 13 sessions but we feel that just as quick as prices came down they could snap back. Think of this move as a stretched rubber band that in our opinion is about to snap. That being said, we’ve advised clients the last few sessions to lightly start working long.
We expect the August contract to trade back to the low to mid $80’s in the coming weeks. The most efficient way we’ve devised to play the coming move is to buy August call spreads for clients. We did think the $2 level will hold in the distillates but we are below that level currently. Much like Crude oil, we feel prices are overextended and due for a bounce.
A trade closer to $4 in natural gas would get our attention but we’ve yet to make a move for clients. Indices are below the 200 day MA as of this post; clients were advised to exit their June ES today but we‘re suggesting to hold their August and September shorts.
The de-risk trade caused us to book profits in sugar for some recent entries in sugar. This may be premature and we still like sugar but decided it made sense to lighten up on some of our client’s winners. Lean hogs were lower today but as we’ve said we need a trade closer to 80.50 in August to reach our profit objectives.
Gold was lower for the sixth straight session but the selling seems to be slowing and if the dollar corrects we should not see much more decline in the yellow metal. We see relatively solid support between $1150-1165. Clients have no exposure at the moment.
As for silver, at the lows today prices touched the 100 day MA and held. We feel aggressive traders could start working long again. However they should be willing to leave the trade at a loss on a trade below $16.50/ounce.
Corn remains on our buy list with good exports again today. Clients are buying September calls and December futures. Those looking for other ideas in Ag we think buying November soybeans below $9 is advantageous. If prices break below $8.75 leave the trade but if we bounce from here we could see $9.75… good risk to reward in my opinion.
It hurt today to see the Yen up over 300 points after we advised most of our clients to exit yesterday at a scratch but that’s the way the cookie crumbles. The good news is on other FX trades we booked a profit for clients who were long the Euro and short the Loonie and clients were buyers of the Pound today.
We expect a 200-300 point rally in the Cable into next week. If this proves to be a an interim top in the dollar we will likely be buyers of most crosses next week…stay tuned.
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 United States Oil Fund (NYSE: USO). The USO is the ETF that tracks crude oil. The United States Oil Fund was down 3.91% in today's session.
