Waiting Game 8/31/11

As we wait for a new month to begin, Labor day to pass when traders come back for Summer break, another jobs number and Fed meeting …tick…tock..tick …tock. Crude closed virtually unchanged in today's session…as we voiced yesterday prices are at a crossroad. It may take a few sessions to decide on a direction from here. We are moderately bullish but until we see October trade below $85 or above $92 we likely will be in a sideways range. The real move in energy today came in natural gas appreciating 3.7% today closing at a two week high busting above the 18 day MA mentioned in recent posts. This could be the start of the move we've been forecasting in recent weeks. Our targets remain $4.25 followed by $4.50 and we recommend exposure in October and November allowing some time for this trade to play out. The S&P at its highs hit our target at 1230 and the Dow got within 30 points with a high of 11700. We think the rally has run its course and the easy money has been made on longs. At these levels we view the risk to high especially with a jobs number in a few days and a FOMC meeting next week not to mention a shortened trading week…we prefer the sidelines. Gold will close unchanged unable to make a new high in today's session. Unless we get a trade above $1850/ounce this week expect a correction to ensue to start off the month of September. We still feel a trade closer to $1650 is in the cards before we see higher ground…trade accordingly. Silver continues to flirt with $42/ounce but we would remain cautious in this metal as well thinking we could see more immediate pressure. On a trade below the 20 day MA at $40.27 in December expect selling to intensify. Exit remaining longs in the Loonie I do not like the chart pattern. The only cross we like in the currency sector is bearish exposure in the Yen thinking a BOJ intervention could happen very soon. Our target in the September contract is a trade below 1.2800. Continue to scale into shorts in sugar. If OJ can hold these levels and start moving north again we may entertain adding to our clients existing positions and putting new clients in the trade. Remember our target in the November contract is $1.70/1.75. The run continues in coffee making it 13 consecutive days but all good things eventually come to an end. Shorts are on our radar but we've yet to act as we're waiting for signs of an interim top…stay tuned. For the most part grains trade higher but low and behold corn traded lower by 1%. We've been catching a lot of grief on our bearish trade which was just established in the last few days mind you. We will let the trade speak for itself… my expectation is $7/bushel in September…time will tell. In the beginning of August lean hogs were over bought now we end the month oversold with prices down over 9%. We're getting close e to a buy so expect bullish trade recommendations within the next few days. Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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