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Commentary Topic from greenfaucet

Commodities Wrap: Crowded at the Top

Oil dropped by 2% today making its way to the lower end of the recent range. We've suggested waiting for lower levels before establishing longs and we are sticking to our guns; ideally a trade down $76 and potentially $74 on the January contract. Expect some fireworks tomorrow as December goes off the board. Natural gas made a new low but prices appear to be closing near the highs 2% higher on the day. We want to stay long but a bearish AGA tomorrow may kill our hopes. Longer term this most likely will be a value play but as for the January mini-futures and call spreads clients need to see a move back above $5 to think these trades have a chance of being profitable. Sugar gave up ground today and in the next couple sessions should break out of the ascending wedge that has been forming in recent months. As you know we have a bullish bias...time will tell.

We hit the ground running in the ES puts purchased yesterday with equities getting clipped today though we are far from out of the woods. Our target remains 1060 on the March contract which the January options trade off. Gold hit the up sloping trend line at its lows this morning at $1130 in December. We expect a correction but have been voicing this in recent weeks and been either early or wrong. IF $1130 was to give way I believe we will be proven correct. The stock market and US dollar will determine gold's destiny in the short run. June & September 10′ Euro-dollar futures have moved higher 11 out of the last 12 days...yes we're still recommending scaling into shorts. We want clients to have a small position and then will look to add to it once it becomes profitable. This is a trade that we would rather be early than late being once it gets started we expect the first leg down to be dramatic. Grains for the most part were quiet though soybeans and soy meal were higher; most likely attributed to the significant pop in weekly exports. We are expecting to re-establish longs for clients at lower levels as indicated yesterday. Live cattle are stabilizing as the recent slide had our clients on their heels as they have various bullish strategies in place. We continue to suggest long exposure in the February contract.  The currency market was quiet but as a side note pay close attention to the 20 day moving averages on all FX crosses as it has served as a pivot point.

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