Bad News Equals Positive Movement For Commodities

On last week Crude finished higher by only $1 failing to make its way back to $105 in June. I had been short with some clients for several weeks and based on the action in Crude and outside markets I advised clients to lighten up Thursday. A trade above $105 and I will likely exit shorts and reverse. Until then I remain mildly bearish. RBOB stayed in a nickel range for the entirety of the week. I’m waiting for a move and once we get out of the current range I would expect  15-20 cents in the direction of the breakout. Heating oil will finish higher by almost a nickel but unable to take out the 100 day MA to the upside. This was the leader in the energy complex this week but without the help of Crude heating oil will likely not appreciate much more than current levels.

Natural gas had its first positive week in the last six gaining almost 10%. That seems like a big move but it is all relative being prices are so devalued. As long as the 18 day MA holds on pullbacks trail your stops and remain long.
 
Stock Indices:  A positive week for stocks which makes it two weeks in a row. I would not rule out a test of the previous highs but I’m advising clients a position on the sidelines…just not a believer. The situation will remain friendly in securities until the Dow breaks 12950 and the S&P breaches 1375 in June futures.
 
Metals: Dr. Copper is back on the move gaining 20 cents/lb. in the last four session lifting prices to three week highs. Copper sets the sentiment for a number of commodities and as long as copper is advancing expect commodities to remain in favor. Gold traded above but failed to close above its 40 day MA. I see resistance at $1665 followed by $1677 the 100 day MA. Silver like gold has picked up in recent sessions but still cannot get out of its own way. The sideways grind that exists in both precious metals is expected to continue…trade accordingly.
 
Softs: Sugar traded below 21 cents for the first time in fourteen months but losses were pared by the close. I think we are close to a turning point so expect me to have buy recommendations around the corner. I have not advised ratio spreads in a while but it would be an inexpensive way to potentially participate in some upside in OJ. Sell at the money calls and buy multiple out of the money calls against your sale. Contact me for exact pricing.
 
Treasuries: As long as Treasuries remain above their 20 day MAs I would expect the bulls to remain in the driver’s seat. That level in 10-yr notes comes in at 131’24 and in 30-yr bonds at 142’4. A doji star in December 2013 Euro-dollar futures yesterday. As a spec play traders could scale into short futures with stops above the recent highs.
 
Livestock: Cattle showed some life to end the week but it’s still a coin toss if the latest lows will hold. I am holding out to see more signs of an interim bottom. If I decided to trade I prefer buying live cattle to feeder cattle but I’ve yet to price out a strategy as I’m not convinced the selling has dried up. After last week’s impressive bounce hogs failed to follow through closing down this week near fresh lows. Weakness should persist on a breach of the recent lows next week.
 
Grains: The battle for acreage is very clear as grains are jockeying for position. Today’s winners were corn and wheat gaining 3.5% and 2.3% respectively. I’ve given up trying to time the grains and have taken a longer term perspective thinking we get a break that could be used as a buying opportunity in the next 3-5 weeks. The story today was a surge in old crop while new crop was only marginally higher. As for November soybeans they continue to dance the trend line. I’m the contrarian thinking we get a break but I have no money in that trade. Grains have been extremely challenging at least for me to trade in the latest weeks so I wish to trade elsewhere until we get a break.
 
Currencies:   Next week's test will be 78.50 in the dollar index…a level that has held on previous attempts. The Commodity currencies ended the week strong and likely have the most upside into next week. The Pounds advance appears to be getting long in the tooth…continue to trail stops but the easy money has been made. Next week we have ECB, RBA and NFP,  so keep positions close to your vest.
 
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