Today in Commodities: Go With the Flow

Matthew Bradbard submits: In case you were not aware the FOMC is meeting today and tomorrow so stay alert as even inaction can be a market mover. We’ve advised aggressive clients to scale into longs in Crude futures and to gain bullish options exposure; today some clients bought May $95/100 bull call spreads. The 100 day MA held today just above $86 and the trend line comes in just below that level.

Matthew Bradbard submits: Clients are nearing their threshold for pain but that is generally the case before a market turns. Reading Dennis Gartman’s newsletter this morning he quoted a very successful trader about “making the hard trade” and we feel we have clients positioned in a few currently…short metals, short the indices and long natural gas to name three open positions.

Matthew Bradbard submits: After 6 positive days is the stock markets day of reckoning upon us? A failed rally in crude today though the 50 day MA did support prices; that level in August is $76.45. Aggressive traders use that level as your pivot point. The option spread mentioned in recent posts; the October $80/85 settled around $1700 today.

Matthew Bradbard submits: As long as indices tread water or move higher money should flow back into commodities and out of Treasuries and the US dollar. Crude followed thru today and now has the 20 day MA in its sights. As we said yesterday as long as equities move higher we think we could see Crude appreciate $3-5 relatively quickly. As of this post August is higher by $1.70.

Matthew Bradbard submits: We had expected trading to slow down by this time but the volumes are still there and we’re seeing plenty of tradable action. $87.50-88 has served as major support in February Crude for the last week and that continued in today’s session. We’re starting to think we may not get a break lower, on a settlement above $90 we will advise clients to start initiating longs again.

Matthew Bradbard submits: No not the ice cream but rather the current market. A bullish inventory report and low and behold a fresh 2010 contract high in Crude. The triple top is negated as we should see $90 on this leg and potentially a re-visit of the spring highs near $93. What has been interesting of late is that the distillates have been outpacing oil on this move higher. When this pattern stops we could be close to a top so monitor their relationships.

Matthew Bradbard submits: Traders need to have a strong stomach as 1-2% swings is becoming a common day occurrence. November Crude hit our target at $83.50 today trading as high as $84.09. We are at a crossroads as a settlement above the August highs likely would mean $90 but if we fail at these levels we should a move $5-7 lower. We would lighten up on longs and for new entries we would wait for signs of the next move. Same story on the distillates…follow Crude’s lead.

Matthew Bradbard submits: Intra-day Crude futures were down just over $2 but as of this post it looks like we’ve pared losses about 50%. We think a settlement below the 100 day MA at $80.63 signals a correction coming. As we’ve said in previous posts, we think a trade down to $77/78 is likely. Aggressive traders could gain bearish exposure in October or November contracts.