Today in Commodities: The Almighty Buck

I’m calling an interim bottom, made yesterday on the US dollar index at 76.05 on the December contract. Prices gained 1% today, the first hurdle that must be overcome to confirm my feeling is a close above the 20 day moving average at 77.50. Our first target is 78.50, again on the December contract.

How we are trying to take advantage of this is short cocoa, short Euro-currency and short silver for clients. How did those work out today? Cocoa was lower by just shy of 3%, a move of $890 on a futures contract, the Euro gave up 1%, a move of $1875 on a futures contract, silver was lower by 3.5%, a move of $3000 on a futures contract.

We should have listened to our own advice on oil, as soon as $69 gave way more selling came into the market. We could see a trade down to $62 on this leg. We own December call spreads and will either use a powerful rally to cut losses or look to leg out, stay tuned. Natural gas continues to creep higher on what I believe as more short covering. We would like to see a 40 plus cent pullback to re-establish longs in December or January for clients.

Sugar could follow oil lower so we may suggest lightening up on longs if we get a pop in the next few sessions. Longer term we like being long but as we’ve suggested in past blogs, manage your trades… do not fall asleep at the wheel.

As seen above, the correction in metals we predicted appears to be underway. We’re not suggesting booking profits on shorts or getting long yet!

Treasuries were higher, some clients remain long 30-yr bonds. We expect a trade above 122′00 in coming weeks on the December contract.

Profit taking in live cattle, conservative traders may want to re-establish puts against their long December futures. Corn and wheat traded higher, that makes 3 higher days in a row for corn and 2 on wheat. We suggest long exposure via futures and options for clients. The KCBOT/CBOT wheat spread has yet to develop, keep profit objective at 20 cents premium to KCBOT.

Key reversal in the stock market yesterday as we see the S&P making its way to 990 and the Dow to 9150. Perhaps some speculators bought puts or hedged off their portfolio??

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.