Weekly Update: August 7, 2013

| August 7, 2013

Weekly Update: August 7, 2013


Commodity Watch:

Gold and silver continued the choppy and directionless trading that’s been present since early July.  Hawkish comments from Federal Reserve Board members over the past week have kept upside potential in precious metals under lock and key.  $1,300 in gold and $20 in silver remain important technical areas I’m watching.

It’s been an absolute drubbing for grains in recent trading. In fact, corn is now firmly below $5 a bushel on all 2013 contracts and soybeans have finally breached $12 in the September contract and beyond.

As tempting as it is, it’s too risky to buy put options in grains right now.

These commodities are drastically oversold which means we could see a snapback rally in the very near future.

Natural gas continued lower last week after the commodity breached important technical support at $3.50 mmBtu.  As you may know, August is traditionally a weak month for natural gas.  So even though prices appear to be getting cheap at $3.24, it’s not quite time to buy for the seasonal fall rally.  However, once we get near the end of the month, things may change in that regard.

I understand it’s frustrating not to have a new trade in most of the commodities we cover right now.  But unless we have a solid fundamental and technical reason to make a trade, we’re simply throwing dice- and that’s clearly not what we’re here to do.

We’re only looking to put our money to work in high-odds technical and fundamental situations.  Until I see that opportunity, it’s best to keep our capital protected and sit on our hands.

Let’s take a quick look at our lone open position in oil…


Portfolio Recap:

. . . . US Oil Fund (USO) September 2013 $36 Puts

Crude had another unwelcome pop to the $108 area late last week.  The bullish resiliency in crude is impressive but it’s still highly likely that fundamentals will eventually take control of this market.  And that means a plunge below $100 a barrel is likely coming by the end of the month.

Today’s EIA crude inventory report revealed a drawdown for last week, which is supportive of oil prices.  However, distillate and gasoline inventories unexpectedly rose, which means summer driving demand is starting to wane. 

The news sent crude down over $1 a barrel to close at just over $104 today.

Keep holding our put position for further downside in the crude market.


Category: Commodity Trading