Weekly Update: October 2, 2013

| October 2, 2013

Weekly Update: October 2, 2013

 

Commodity Watch:

Yet another volatile week in the commodity markets…

Corn is trading to new multi-year lows thanks to a bearish USDA stocks report.  According to the government agency, US corn inventory levels are higher than investors previously thought- hence this week’s selloff.  Corn is dropping to levels not seen since September 2010.

Oil spent last week chopping around the $103 a barrel level.  However, this morning’s EIA inventory report revealed US crude stocks rose 5.5 million barrels for the week of September 27th.  That’s a bigger than expected rise, which makes today’s report a fundamentally bearish development.

However, at the time of this writing, the price of oil is up $1.49 a barrel.  Stay tuned, there’s another excellent put buying opportunity coming soon in the oil market!

Gold had yet another wild week thanks to the uncertainty surrounding the US Government shutdown.  The yellow metal dropped $40 an ounce yesterday as investors ran from risk assets. However, the metal is rebounding strongly today as investors realize gold is the place to be in times of extreme financial uncertainty.

And listen to this…

Washington politicians have until October 17th to come to an agreement over the ever-expanding US debt ceiling.  The closer we get to that date without a decision, the more investors will look to gold.

Let’s get to our open trades in natural gas and silver…

 

Portfolio Recap:

. . . . US Natural Gas Fund (UNG) October 2013 $19 Calls

Bigger than expected inventory additions has hurt the price of natural gas over the past few weeks.

However, natural gas bounced nicely off the $3.45 technical support level last Thursday.  That’s in spite of the fact that US inventory levels grew more than expected for the week of September 20th.

Like I said in last week’s update, we need natural gas to rally soon in order for our UNG $19 calls to get in the money and give us a profit on this trade. 

Conservative investors should be out of this trade.  Those willing to accept more risk can hang on until expiration.

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

The mixture of St. Louis Federal Reserve President James Bullard’s irresponsible statements last week, and the uncertainty surrounding the US Government shutdown this week, has silver bouncing around like a 5-year old on a sugar high.

Silver dropped just over 3% yesterday, only to recover all of its losses and more today. 

The next catalyst for silver is the US Debt Ceiling showdown.  We’ll likely see silver trade higher as the October 17th deadline approaches.

Keep holding the October $22 calls for a rebound in silver…

 

Category: Commodity Trading