Risk off 6/27/11

We could see investors taking some risk off in the coming sessions so don’t be afraid to move to the sidelines or have a short bias on some of your positioning. Crude will close slightly lower today but $90 remains support as August has not settled below that level the last three sessions. If RBOB and heating oil are able to trade higher the products  may lift Crude off the mat. Today RBOB gained 1% and heating oil was higher by approximately 0.40%. Far from a rally but signs of a preliminary bottom. We see a potential triple bottom in natural gas as well as $4.20 gas supported August. We’ve suggested gaining bullish exposure in September contracts to clients in recent sessions. A 50% Fibonacci retracement  should get prices back near $4.60 BTU. Indices should end 1-2% higher with equities look poised to trade back near their 100 day MA; in the S&P at 1307 and 12160 in the Dow. The dollar made a  new high and failed losing 0.60% today. My gut tells me we’re heading south from here but wait for  confirmation.  If cash is raised and traders take risk off look for the Yen to continue south. We will likely be fading any rallies with a target of 1.2000 on the September contract. Lean hogs  gave up 3.10% today closing below the 20 day MA…expect continued weakness. Live cattle lost nearly 2% and we expect more selling here as well…trade accordingly. Gold lost 0.33% while silver was the bigger looser down over 3%. We are buying this dip for clients with 3 plus month time frames. This is catching a falling knife but when buying premium we’ve found it is cost effective to buy on big down days. The suggestion has been October call spreads in gold and December call spreads in silver.  Cocoa picked up 1.21% as it should make a run at the 200 day MA in the coming sessions; in September at 3060. October sugar traded lower but well off the lows paring losses in late dealings. We’re still targeting 23 cents in this contract…trade accordingly. Corn and wheat lost ground today while soybeans were a marginal gainer. We suggest light long exposure  in agriculture into Thursdays USDA. Some of our clients are in CBOT wheat and soybean oil and will likely be buying corn and soybeans in the coming sessions. 30-yr bonds broke the 20 day MA but 10-yr notes are still about 1 basis point above that pivot point. On consecutive settlements  below that level perhaps an interim top is in place.

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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