Weekly Update: July 24, 2013

Weekly Update: July 24, 2013

 

Commodity Watch:

Gold and silver received a surprising boost over the past few days with both metals popping above important technical resistance.  However, the rally is being tempered today as the US Dollar finds technical support at the $82 area. 

If gold and silver are to continue higher, we will need to see weaker than expected economic data out of the US in coming weeks.  Weak data will support the idea that the Fed will be unwilling to start tapering in September, which many economists are now predicting.

Corn continued weakening in recent trading as relatively wet and cool weather is gracing the Midwestern US.  This supports the idea that the USDA’s lofty acreage and yield estimate may actually come to fruition. 

As you know, high expectations from the USDA are what’s driving corn prices lower in the first place.

Next Monday’s USDA crop progress report will provide further insight on the situation.

Let’s take a quick look at our open positions in oil and natural gas…

 

Portfolio Recap: 

. . . . US Natural Gas Fund (UNG) August 2013 $21 Calls

Last Thursday’s EIA inventory report gave us just what we were looking for. Natural gas prices spiked over $3.80 mmBtu on a weaker than expected inventory build.  Obviously, the recent spate of high temperatures in the Northeastern US had consumers cranking up the AC. 

However, the rally was short lived as 10-day forecasts now show a cooling trend for the region.  Of course, that means electricity demand will moderate and allow more gas into storage.

As you’re likely aware, we’re slowly running out of time on these August UNG $21 call options.  If we don’t see a substantial uptick in natural gas soon, we’ll have to exit this trade solely due to the upcoming expiration.

For now, keep holding the UNG calls for higher prices…

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

WTI crude made an unwelcome run towards $109 a barrel last week on yet another bullish EIA inventory number. 

However, oil is starting to plunge today as this morning’s EIA report wasn’t quite what the bulls were expecting.  As of this writing, WTI is down $1.85 and trading at $105.38 a barrel. 

Remember, we’re betting crude is going to trade much lower by September.  With the summer driving season coming to a close in August and the situation in the Middle East starting to simmer a bit, we should see this put trade turn into a big winner for our portfolio!

 

Category: Commodity Trading