Weekly Update: October 30, 2013

| October 30, 2013

Weekly Update: October 30, 2013


Commodity Watch:

As you’re likely aware, Ben Bernanke and the Fed release their FOMC meeting results this afternoon.  Investors are expecting Bernanke to produce dovish statements today due to the recent economic setback created by the US Government shutdown.

What’s that mean for commodities?

If Bernanke follows through with statements supporting unrestricted quantitative easing, it will likely send the US Dollar lower.  As a result, we should see commodities, especially gold and silver, trade higher.

On the other hand, the Fed Chairman could shock investors and announce imminent plans to taper bond purchases.  It’s unlikely, but if it were to happen, you can bet your bottom dollar both equities and commodities will get hit hard.

For more on the situation, let’s get to our open position updates…


Portfolio Recap:

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

Unfortunately, Ag commodities put in a nasty bearish reversal in recent trading.  Sugar and cocoa retreated from their bullish runs while corn and wheat fell on Monday’s USDA crop report.

Needless to say, this development isn’t helping our position in the DBA $26 calls.  We’ll need a strong performance from Ags in coming weeks in order for this trade to get back in the green.

Let’s keep holding our DBA $26 calls for a rebound in Ags…

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

Ever since Congress passed their ill-advised US budget and debt-ceiling extension, it’s been game on for gold bulls.  Today’s FOMC meeting results will give additional insight into the direction for gold and silver in coming months.

Keep holding the November $12 puts.  There’s a chance Bernanke isn’t going to be nearly as accommodative as investors are expecting in today’s FOMC meeting.

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

I’m expecting big things from this trade in coming weeks…

Tuesday’s American Petroleum Institute (API) oil inventory report revealed US crude stocks rose more than expected last week.  In fact, 5.9 million barrels were added to supplies, much higher than the 3.5 million barrels expected by analysts.

Today’s EIA report will likely reveal the same data.   As a result, we should see oil prices continue weakening in early November.

Keep holding the USO $36.50 puts for continued downside in the price of crude…

. . . . US Natural Gas Fund (UNG) January 2014 $19 Calls

Our most recent trade is based upon the strong seasonal tendency for natural gas prices to rise into Winter.  Since we’re in the January 2014 calls, we have plenty of time to see this trade through.

Keep holding the $19.00 UNG calls for a rebound in natural gas as Winter draws near…


Category: Commodity Trading