Commodity Wrap: Inaction Sometimes More Damaging Than Action

Do not get complacent because the market is quiet.  Inaction can sometimes cause more damage than action. Do not forget to manage your trades. Crude oil is flirting with the $100/barrel level once again. I am mildly bullish but trade small as a trade back under $97.50-98 could mean lower ground. It is not the strength in Crude that I am impressed with but rather the relentlessness in the distillates that continue to push higher.

Heating oil and RBOB are approaching the highest level they have seen in almost one year. I’ve advised hedgers to keep their hedges on to protect from further upside but be cognizant that we could have a violent reversal so look for any signs of a reversal. Natural gas is showing signs of life but still is having trouble retaking its 9 and 20 day MAs, a sure sign that there could be weakness soon.

Big surprise, stocks  inch out another positive trade. Continue to use the 9 day MA as your pivot point and major support.

Gold and silver continue to exhibit signs of an interim top. I still think a correction is likely in the immediate future. I will not change my mind unless gold trades over $1770 and silver over $35.

Cotton has lost ground the last four sessions and with prices back under the 50 day MA for the first time in 2012, fade rallies as I expect a challenge of the December lows, 6-7% lower from current levels. OJ and coffee which I drank both this AM should continue lower as well…do not rule out coffee joining OJ under the $2 mark.

Treasuries continue their slide…bearish trades should trail stops and continue to use the 20 day MA in 10-yr notes and 30-yr bonds as their pivot point.

Mixed bag in meats with cattle slightly lower and hogs a small gainer. I am advising buying dips in both. This trade may take a few weeks to set up, so be patient. No surprises from the USDA on Thursday and based on the reaction we will likely get a break in grains allowing a long entry from lower levels.

Wheat was the main loser on Friday, shedding over 2% while corn and soybeans were marginally lower. The closer  prices get to the level we saw in the beginning of the year the larger interest I have in advising bullish trade to clients. With Central banks keeping rates as is, there have not been fireworks in FX with the exception of the Yen. The Yen is down for the last five days losing 2.25%. In my opinion, this could be the beginning of  larger leg that could drag prices back to levels seen in late October.

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