Weekly Update: June 12, 2013

| June 12, 2013

Weekly Update: June 12, 2013


Commodity Watch

Another relatively slow week of trading for commodities…

Gold is still stuck in a range bound pattern on either side of $1,400 an ounce.  The metal saw a quick drop last Friday when better than expected US jobs numbers were released.  However, gold is up $14 this morning and looking to add gains in late session trading. 

Last week’s EIA natural gas inventory report was bearish.  For the week of May 31st, inventories rose 111 bcf.  That’s well above analyst estimates.  Natural gas will likely remain in a slow downtrend with the next major technical support at the $3.50 mmBtu level.

This morning’s WASDE report from the USDA revealed bearish information for corn.  Acreage planting estimates didn’t budge which means the government agency is still expecting a bumper corn crop this year.  Corn traded down slightly to $6.50 a bushel, -1.25%, on the news.  The next WASDE report is July 11th with a crop progress report next Monday.

Let’s go over our open option positions… WTI crude and Silver.


Portfolio Recap

 . . . . US Oil Fund (USO) July 2013 $33 Puts

West Texas Intermediate (WTI) is still displaying incredible bullish resilience.  Even though equity markets experienced a few days of heavy selling over the past week, WTI barely budged.  What’s more, today’s EIA oil report revealed another unexpected build in inventories (a bearish sign) yet crude held its ground.

The recent outperformance for crude is quite unusual.  Even though US inventories are still sitting near multi-decade highs, the price of crude is holding firm. 

Remember, we initiated this trade expecting oil to drop.  It’s clearly not doing that… yet.  As a result, if WTI breaks above $97.50 in coming days, conservative investors should consider closing this position.  Technical support is still at $90 and $85.

For now, keep holding the July 2013 USO $33 puts.  WTI is at strong technical resistance and will need a huge push from the bulls to get it over the $97.50 area.

 . . . . iShares Silver Trust (SLV) August 2013 $22 Calls

Silver reacted poorly to last Friday’s US jobs number even though unemployment levels rose to 7.6%.  In addition, May job additions of 175,000 aren’t likely enough to convince the Fed to start the highly publicized “tapering” of their quantitative easing program. 

Even though it’s down over the past week, silver has a lot going for it at these levels.  Not only is there solid technical support at $21.50, but CFTC commitment of traders data show large futures traders are slowly unwinding short positions and establishing new long positions in the metal.

However, silver did hit the $21.50 support level in recent trading… 

As you know, that’s the level of technical support mentioned in the original trade alert.  If you’re a conservative investor, you may have closed this trade to control risk.  If so, that’s fine.  We’ll have a new trade coming your way soon.

But officially, this trade is still open…

The recent drop in the US Dollar bodes well for silver in the long run.  Let’s keep holding the August 2013 $22 SLV calls for a rebound in silver.


Category: Commodity Trading