The housing market has not bottomed, we’re not creating jobs, and commodities are increasing in value. I do not see any recovery. Selling was rejected again in crude today but with the swoon in the dollar I would’ve liked to see more upside today. With supplies at current levels, rumors of a production increase by OPEC as early as next week and a potential move in IR in China, we would move to the sidelines. We would look to be a buyer into next week on a retracement below $98 in July if given the opportunity. Hedgers in the distillates should have some type of exposure to protect from an appreciation of fall pricing; we currently have light long protection with hedgers in September through December. Natural gas futures gave up 2% today and are showing preliminary signs of an interim top. We’re suggesting bearish exposure to aggressive clients with a target of $4.40/4.45 in July. Adding only 54,000 jobs and a jump in the unemployment rate took the wind out of the sails for stock bulls as the indices closed down today below the 100 day MA for the first time in four months. Based on the technicals momentum is shifting bearish and we could see an additional 2-3% decline in the coming weeks but we wish to be on the sidelines. We see better trading opportunities elsewhere all things considered.
Off the highs two weeks ago the dollar index has lost 3.5% and we see little support until we visit the lows from early May 2.4% from current pricing. Continue to buy dips in the euro, cable and swissie. We advised recent long entries in the loonie to cover their position at about a scratch depending on fills. We may look to re-enter longs but with the volatility in metals and energies we would like to see a clearer picture next week.
Aggressive traders can gain bullish exposure in live cattle as we feel the base formed this week should serve as solid support. As we alluded to yesterday the 9-day MA in gold appears to be the pivot point, with the August contract at $1,532. Clients have no exposure though we‘re interested in gaining bullish exposure on confirmation of a resurgence of the up trend ... stay tuned. July silver was able to maintain the 20 day MA today virtually unchanged but we view silver more of a trading market as in the last month we’ve been directionless. Gentlemen buy dips and sell rallies for now. Support from two weeks ago held in cocoa today as prices pared losses, closing just below 2900 in the September. We like long options and futures expecting a bounce. In the last two days coffee has rallied almost 8% lifting prices back above the 20 day MA. We do anticipate more upside in the immediate future but have advised clients to have short entries from higher levels on their radar. Corn made a new high and failed, though taking our clients' position we really think a decent correction is around the bend. What that translates to is 40-60 cents. Treasuries were unable to hold onto their gains for the last three sessions. Either we trade south from here and get some value back or on a new high cut losses ... that goes for 10-year notes and 30-year bonds in June and/or September contracts.
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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