Weekly Update: November 27, 2013

| November 27, 2013

Weekly Update: November 27, 2013


Commodity Watch:

Well, it appears Iran and Western powers came to an agreement after all.  In a surprise weekend deal, Iran promised to halt their 20% uranium enrichment program in exchange for a reduction in economy crippling sanctions.

Not surprisingly, WTI crude is down since the news arrived.  That has our USO January 2014 $34.50 calls in the red.

However, the devil is in the details with this new deal…

Not only is the agreement only good for six months, but not everybody in the Middle East is happy about it.  Israel is calling the deal a “historic mistake” and Saudi Arabia is now threatening to pursue new foreign policy goals.

Bottom line…

This historic agreement may actually do the opposite of what was intended.  Middle East uncertainty will likely increase due to the timing and nature of the agreement between Iran and Western powers.

As a result, I wouldn’t be surprised to see this deal fall through in coming weeks.  Let’s keep holding our calls for a rebound in crude prices.

Here’s an update of the remainder of our open portfolio positions…


Portfolio Recap: 

. . . . US Natural Gas Fund (UNG) January 2014 $19.00 calls

An extended bout of extreme cold across the Eastern US has natural gas prices running to multi-month highs.  In fact, the commodity is testing $3.90 mmBtu in this morning’s trading session.  What’s more, today’s EIA natural gas inventory report came in at a draw of 13 bcf, which is a steeper withdrawal than analysts’ estimates.

No doubt about it, this is just the start to the winter heating season that bulls needed…

However, given the hefty run of the past few weeks, we may see a brief pullback in natural gas starting next week. After all, temperatures are expected to moderate in the East over the next 6-10 days. 

But don’t let that steer you away from holding this trade for higher prices…

This abrupt start to winter is falling perfectly in line with the Farmers Almanac’s prediction for “bitterly cold” temperatures this heating season. 

As a result, the odds of natural gas busting above $4.00 are growing quickly.

. . . . iShares Comex Gold Trust (IAU) January 2014 $12 Puts

Gold popped higher on the open this morning, but was immediately met with heavy selling pressure.  Investors are clearly taking every chance they can get to sell this market.

Like I said in yesterday’s trade alert, the fundamental reason to own gold is diminished with US inflation levels running at extremely low levels.

Keep holding these IAU January 2014 $12.00 puts as gold is technically and fundamentally ready for additional downside in coming weeks.


Category: Commodity Trading