Commodities Wrap: Venturing Off the Beaten Path

Over the years I’ve tried to stay informed on 50-60 different commodities. Paying attention particularly to commodities off the beaten path has provided my clients with opportunities when the majors did not provide trading opportunities. for example following markets like lean hogs, cocoa or soybean meal when gold or oil are not giving clear signals. 

Crude oil closed under the 9 day MA for the first time in three weeks…a preliminary sign that prices may back off. Stay tuned for confirmation.

On a settlement below $100 I would re-visit the idea of bearish exposure. Natural gas lost 6% yesterday with serious chart damage. My suggestion is refrain from picking  a bottom as we thought $3.20 was the low and we are carrying a healthy loss for clients. Thankfully it is a small position. If we do not see signs of a bottom we will be cutting losses very soon…stay tuned.

Same tune in stocks. As mentioned in recent posts, we expect equity prices to creep higher and see the 9 day MA as the pivot point. As long as that level supports, I remain friendly. Gold has gained 7 out of the last 8 sessions and should continue higher in the days and weeks to come.

I expect  a trade up to near the 50 day MA in February at $1685. $28.50-28.75 should support pullbacks in  silver and the 50 day MA is my target here as well coming in at $31.45.

The dollar reversed course again as it appears now new highs will be seen before the weekend. On a new high, expect more weakness in other crosses. We have seen too much whippy action for me to have any interest in this sector currently.

OJ lost nearly 10% yesterday as the news of a fungus out of Brazil, the second largest producer, may have caused an overreaction Tuesday. Expect a further failure but with this wild west action I would run away from any exposure.

Coffee gained 4% trading above its 50 day MA in 5 weeks and prices should continue higher. I see resistance above $2.50 in March…trade accordingly.

Both 10-yr notes and 30-yr bonds are back above their 20 day MA as the momentum has shifted back to the bulls. I have no client exposure.

Soybeans, soy meal and soybean oil were the big losers ahead of today’s USDA reports. I like the idea of buying grains at lower levels but have suggested no exposure into the report. I prefer to react as opposed to outsmart the USDA.

Look for potential trade ideas in corn, wheat and soybeans later this week. If lean hogs break their mid-December lows except momentum to drag prices 2-3% lower…trade accordingly.

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