Commodity Trading: Investors must exercise patience
Commodity Trading: Investors must exercise patience
For April 13th– April 17th 2009
By: Matthew Bradbard
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The word is China’s economic recovery will begin later this year and pick up into 2010. This may be true but what about conditions in the US, Europe, India and emerging markets? We are starting to see some light domestically but have things really gotten considerably better? The difficulty is I still think there is much more pain to come and I’m not ready to go all in just yet. That seems to be the case with many with the record amount of monies on the sidelines. Until real estate bottoms, the employment situation gets better and the banks really start lending, there is no reason to celebrate. I suggest investors use the most recent move in equities to lessen their exposure and not buy into the fact that commodities are going to continue higher at their current pace. Take advantage of the large swings and diversify your portfolio. Be patient as it may well take years to get back to normal market conditions.
Livestock
The USDA increased its estimate of 09’ beef production to 26.44 billion pounds, down slightly from 08’ production levels. The 09’ average price estimate for choice steers was kept unchanged at 86.5 cents/lb. June live cattle closed up 1/3 cent, the highest close in 8 weeks filling a gap from 2/13. Resistance is seen at 85.50 followed by 86.30 with support at 84.25 followed by 83.75. We would be a buyer on a setback with stops below the 20 day moving average which is at 83.00. May feeder cattle were higher by 2.175 cents, the highest close since 2/10. Prices have now gained 6% in the last 2 weeks. Support is seen at 98.40 followed by 97.10 with resistance at 99.50. The last time prices were over $1 was 1/6, will that happen this week?
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The USDA reduced its estimate of 09’ pork production to 22.775 billion pounds, down 2% from 08’ production levels. The 09’ average price estimate for barrows and gilts was increased from 46.5 to 47.0 cents/lb (63.5 cents lean). June hogs were up .625 at 74.27 closing back above the 20 day moving average.
Resistance is at 74.60 then 76.00 with support at the 20 day moving average and then 72.70. We are positioned long with clients, purchasing call spreads, selling puts and long futures with a target of 77.50/78.00.
Financials
Stocks: Stock markets defy logic again trading higher but will that last as earnings start to trickle in? The S&P 500 picked up 12.50 points last week to trade at its highest level since 2/10 gaining 1.5%. This was in large part to upbeat news on some financials, namely Wells Fargo’s optimistic views and revisions to the uptick rule. Resistance comes in between 865 and 870 with support at 825 followed by 800. The Dow was higher by 38 points to gain .05% on the week, but navigating these waters could be tense being the Dow had a 400 + point range in a shortened trading week. Resistance comes in at 8060/8080 followed by 8250 with support at 7840/7880 followed by 7575. We expect 7400/8100 range and for prices not to wander too far from those parameters in the next few weeks. The NASDAQ was higher by 20.50 or 1.5% to its highest price this year. The NASDAQ has been positive now for the last 5 weeks gaining 25% in that time. Resistance comes in at 1375 with support at 1290.
Continue Reading about the Financials and Softs
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_____________________________________________________________________________________Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.
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