Weekly Update: June 26, 2013

| June 26, 2013

Weekly Update: June 26, 2013


Commodity Watch:

Volatility in the commodity markets is ramping up.  Here’s where major commodities are sitting as June draws to a close.

No doubt about it, the price of gold was absolutely lambasted in recent trading.  The yellow-metal broke decisively below technical support at $1,322 last week and is trading below $1,250 as I write this morning.  The next area of technical support for gold is at $1,200.  Given the severity of the selloff, we’ll likely see the metal hit that level soon.

WTI crude finally gave up some ground last week.  Rumors of Syrian peace talks, along with the reaction to Fed Chairman Bernanke’s speech, sent oil down $3 last Thursday.  As I’ve mentioned before, the fundamentals for crude are bearish.  However, given the headline uncertainty out of the Middle East, low risk trading opportunities in crude are hard to come by at the moment.  But rest assured, another trade in crude is coming soon.

Corn is giving back much of the gains from last week as weather forecasts now show moderating temperatures for the Midwestern US.  Of course, that means growing conditions will likely be favorable in coming weeks.  The USDA’s next WASDE report is July 11th, and it is very important.  Traders will be watching closely for adjustments to planted acreage and yield estimates.

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


Portfolio Recap:

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

Our silver trade is all but done for.  With the price of the white metal being dragged down by gold over the past few days, there’s little chance of this trade becoming profitable.

If you haven’t already, go ahead and close this trade. 

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

Once again, last week’s EIA natural gas inventory report met analyst expectations with inventory additions of 91 bcf.  That should be viewed as neutral for the natural gas market.

However, the same moderating temperature forecasts that have brought selling pressure into corn are doing the same for natural gas.  If mild weather persists into the first two weeks of July, we could see larger than expected storage additions going forward.

However, take a look at this chart…

Natural Gas

As you can see, natural gas is trading down to trendline support at $3.60 mmBtu.  Traders will likely use this important technical area as a buying opportunity.  As a result, we’ll keep holding our UNG August $21 calls until further notice.

The next two weeks are important for this trade.  Remember, if natural gas falls below $3.50, conservative investors may want to close the trade to keep risk in check.

Our profit targets remain at $4.10 and $4.40…


Category: Commodity Trading