Commodity Standouts 8/24/10

Investors lose money in commodities every day and there is a tremendous amount of risk but at least these markets are moving. Recent standouts: cocoa 33 year high, sugar 29 year high, coffee 13 year high, cotton 2 year high, pork bellies record high, gold record high, corn 8 month high, wheat largest one month move in over 50 years. Wake up people are commodities your portfolio? Clients were early getting long Crude oil and the distillates and the slide in the last week has been slightly painful. But as a trader just when the pain is almost unbearable a market generally snaps back. Clients are willing to see if the lows just under $71 hold. If we see a slide below those levels with no reprise we will admit we’re wrong and cut losses for clients. Will $4 be the bottom in natural gas…time will tell. Clients have been advised to scale into longs and we would advise November contracts at this point. Additionally the idea of purchasing 50-70 cent call spreads makes sense for options traders of course in my opinion. A fresh five week low in the indices as the intermediate trend remains down. Housing numbers and Q2 GDP in the coming sessions are not likely to support. On a move to 1025 in the S&P clients will be advised to lighten up on shorts/October put options. Lower trade was rejected in December cocoa; we like the idea of scaling into longs anticipating a 7-15% appreciation in the coming weeks. Coffee got hit for 8% today dragging prices back to the 50 day MA. We think another 5-10% is likely in the coming sessions. DO NOT FIGHT THE FED!! Those short Treasuries must have a higher tolerance for pain then my clients. We’ve suggested a few times to probe shorts with tight stops and have decided we would rather be late to this party. We’ve yet to make a move on behalf of clients but a bearish engulfing candle in live cattle gets me interested enough to start tracking October and December puts. December gold bounced off the 50 day MA paring losses and closing slightly higher. Clients have NO exposure. The next few days will be critical in silver as prices should break out of the ascending triangle. Bullish move today with prices gaining just over 2%. Clients are advised to scale into futures and to purchase December call spreads. This could be the leg that lifts prices over $20/ounce…stay tuned. We’re getting the correction called for in corn; the 200 day MA in December 2010 comes in at $4.02, the 100 day at $3.79. Buy dips! We initiated some futures spreads for some clients today; buying December 2011 and selling December 2010. We are forecasting a 30-50 cent lower trade in soybeans. Wheat got hit for 2.5% today; in our opinion there is an additional 40-70 cent decline coming. The Pound is below the 200 day MA for the first time in three weeks. What was support should now become resistance. Today the Aussie and Loonie were hit the hardest of the majors; we expect more downside. The Yen broke out to fresh highs…eventually a good short but not yet.