Commodities continue to chop around trying to hang on to these high prices. We continue to expect them to move a bit lower in the near term as they consolidate the recent gains. Overall we are very cautious at this time as we have lots of volatility and little directional bias in the short term.
Crude:
Crude oil did break out to new highs last week but since doing so it is lacked momentum to follow through in any real way. We are now buying puts on rallies and even selling short above 110 with stops above 111.89 basis June. We are targeting a move back to at least 100 in the near term and frankly a deeper correction could come if 100 does not hold support. We do not see crude being able to hold onto these prices in the near term as we lack any major catalyst that could propel us higher.
NG:
Natural gas is forming a large bull flag but near term we see resistance at 10.50 basis July holding. We are therefore buying 10.00 puts and or selling short with stops above resistance, targeting a move back below 9.50.
ES:
The S&P500 remains range bound as regular readers know. We expect this range to continue to hold up in the near term and we are now getting closer to the lower end of the range so those who sold short with us above 1375 or bought puts should be exiting at least half the position and moving a stop in above 1350 to protect the remainder. We are covering the rest on pushes below 1325 and at the same time beginning to build a new long trade below 1325.
Bonds:
Bonds are trending higher via the successive higher lows on the daily charts but fail to confirm that with successive higher highs. We need to see bonds break out above 122 to really convince the bulls that we are back to the races. We bought some 119 puts late last week and will hold them unless we close above 121 this week. If 121 holds then we expect to see bonds retest 118 and that would be when we exit those puts.
Metals:
Gold managed to bounce last week and we are looking at buying what could turn out to be a head a shoulders bottom on the daily chats. We are going long via a June 950-1000-1050 butterfly spread to keep cost and risk below $1,000. We need to see a close above 950 to bring the bulls back in but we suspect we will see that later this week or early next. We are really only looking to retest above $1,000, not necessarily breaking out above the highs just yet. Silver remains a buy as well with stops below the April Fools day lows. Copper failed to close above 405 and is therefore a short term sell on rallies with stops above that point. We only are looking for it to correct to about 370 before turning again so this will be a short term short trade.
Grains:
Wheat continues to trend down and we are still targeting lower prices before we bounce. We are expecting Wheat to find support near 8.00 and would expect a sideways consolidation to begin once that point is tested. Corn did spike above 6.00 but failed to hold it and we are now holding the 580 puts we recommended last week. We expect to see corn fall back to 5.50 by months end. Last week we suggested that soybeans had about a dollar of near term upside in them, we have now seen that dollar and we are exiting the few longs we had taken. We see beans falling back to 13.00 on the May contract at which point we would buy long again. Overall we are biased to buying dips in beans and selling rallies in corn for the next few weeks.
Softs:
OJ is still trying to get a rally going after failing to hold onto the early gains last week. We are buyers at the lower end of the range and look to sell on rallies to or through 120. Cocoa did move back up as we forecasted last week and we are now exiting those longs. We could continue to rally but the overall picture at this time is mixed so we will stand aside this week. Coffee failed to hang onto its rally last week and is still more or less drifting in a sideways channel. We will again buy any dips towards 125 with stops 2-3 points below. The range is clearly between 125 – 135 so for trade it accordingly. We do not see sugar moving above 13.00 anytime soon and would at this point be sellers of rallies, we expect to see sugar trade between 11.50 and 12.50 for the next few weeks. Cotton continues to be a buy on major dips on the daily chart so long as support just below 70 holds.
