Reversal Coming 7/27/11

We’re setting up to capitalize on reversal of the recent trends, i.e. energies, metals and indices just to name a few. Crude oil as of  this post will close down just over $2/barrel below the trend line that has held since the June lows. Exit all longs as we could see a retracement back near $94/barrel in September. We will be eager to re-establish longs from lower levels for our speculative clients. As for hedgers we advised lightening up on hedges in the products and like Crude look to re-establish from lower levels. Natural gas continues to dance around the 50% Fibonacci retracement level on the daily charts  though we want to see more downside before stepping in as a buyer…stay tuned. Stocks were hit for 1.5- 2.5% cutting through their 50 day MA’s hinted at in recent posts like a hot knife through butter. We see more downside as equities may trade down to their early June lows…trade accordingly. Higher trade failed to hold in  both PM’s as gold will close approximately $15 off its highs and silver nearly $1.25. We  still expect a sizable correction; a 50% Fibonacci retracement in gold drags October to $1550 and silver should find its way to its 100 day MA at $37.90 in September. We could see these moves by month end which would mean in the next 48 hours. Dead cat bounce in the dollar index…we think so. The greenback gained 0.80% today as we are targeting a pop to 75.00/75.50 on this leg. The Loonie failed to break it’s up sloping trend line again today but did lose 0.60%. It is our favored short as a breach of that line selling should intensify.  In September 1.0350 is our target…trade accordingly. Sugar prices are in the stratosphere as most commodity traders recognize but we’ve failed to get above 31.50 now for four session in October…signs of an interim top. We’re likely talking our client’s position but some still carry shorts anticipating a big break lower. Aggressive clients opted for a a 1:3 ratio spread getting short November OJ to capitalize on a 7-10% break in the coming weeks. That is the game plan anyway. December cotton futures have picked up 10 cents from their lows just yesterday, those long should expect an additional 10 cent advance.  Same song and dance in 30-yr bonds and 10-yr notes continue to use the 20 day MA’s as your pivot point. The play in our opinion continues to be bearish exposure in long dated Euro-dollar contracts. We have not made a move just yet  but we would like to be a buyer of corn and soybeans on a break ahead of next month’s USDA report…stay tuned. Live cattle trade often follows the move in the S&P so we opted to square our clients positions in live cattle futures and we will be exiting options on a bounce and re-evaluate. This was a scratch and we would be willing to re-explore longs on a break lower.

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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