Weekly Update: October 23, 2013

| October 23, 2013

Weekly Update: October 23, 2013


Commodity Watch:

We’re finally getting some sizeable moves in commodities…

As you know, the last few months have been incredibly choppy in the hard asset markets.  Uncertainty surrounding the Fed’s tapering plans has kept these markets under lock and key for weeks now.

But now, thanks to the newfound market expectation that Ben Bernanke will delay tapering until the Spring of 2014, the US Dollar is going in the toilet.

Of course, a declining dollar puts the wind at the back of certain commodities…

Gold and silver jumped once investors found they’ll have to deal with whole debt ceiling debacle again in February 2014.  Ag commodities such as wheat, corn, and soybeans are perking up as well.

But not all commodities are reacting positively…

Natural gas fell in recent trading thanks to a bearish weather outlook for early November.  Also, oil is losing ground quickly thanks to the bearish fundamentals I’ve been talking about for weeks.

For more on oil as well as our other open positions, let’s get to the updates…


Portfolio Recap:

. . . . PowerShares DB Agriculture Fund (DBA) November 2013 $26 Calls

DBA ran into the down-trending 200 day moving average this week.

Take a look…

PowerShares DB Agriculture Fund

As you can see, this highly important technical indicator is coming down to meet the soft commodity based ETF.  It’s not unusual to see assets turn lower in this situation.

But here’s the deal…

Corn, wheat, and soybeans are starting to break to the upside.  What’s more, sugar and cocoa are making new highs on a regular basis.  As long as grains follow through with bullish price action in coming days, DBA will likely be able to break above this important resistance area. 

Let’s keep holding our DBA $26 calls for higher prices…

. . . . iShares Comex Gold Trust (IAU) November $12 Puts

Gold is back above $1,300 an ounce thanks to the recent drubbing in the US Dollar.  It appears bulls have finally returned to this market after months of ambivalent price action.

But I’m not quite ready to go all in on the bullish side of the gold market just yet.  You see, the US Dollar is trading just above a very important technical support level.

Take a look…

US Dollar

Once the Greenback reaches this level, we may see bears take control of gold and silver once again.  So for now, lets hold onto IAU November $12 puts. 

Remember, this is a very low risk trade as the premium we paid for these IAU puts was a mere $20.00.

. . . . US Oil Fund (USO) December $36.50 Puts

No doubt about it, crude oil is breaking down quickly…

The essential commodity dropped from $102 a barrel last Wednesday to a closing price near $97 today. 

Why such a quick drop?

This week’s EIA inventory data revealed US crude stockpiles are surging.     In fact, today’s report showed 5.2 million barrels of oil additions for the week of October 18ththat’s well above analyst expectations.

Our December $36.50 puts are up a solid 52% thanks to crude’s breakdown. 

While it’s tempting to take these profits to the bank, crude will likely continue lower into November.  In fact, our $95 price target should be a near certainty given the severity of this week’s sell off.

Keep holding our USO $36.50 puts for lower oil prices in coming weeks!


Category: Commodity Trading