The G Manifesto

Commodity Trading: It’s All About Confidence

For March 30th– April 3rd 2009
By: Matthew Bradbard
http://www.mbwealth.com

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Have things gotten better? I don’t know, but investor’s confidence has returned. It’s not so much that things have improved dramatically, but rather that investors are willing to take some risks now that we have gotten more clarification from Bernanke, Geithner and Co. After weeks of waiting, we finally received more details on the programs that the government is trying to institute in order to remedy the problems at hand. The chatter has been on the recent rally in stocks but low and behold look at the recent uptick in a range of commodities. Looking at the CRB Index ytd, it has out performed stocks moving 8.5% lower when the S&P is off 10%. Bottom line, money managers and investors alike are looking at commodities as a way to hedge against the coming inflation in addition to diversifying their portfolios.

Livestock

After the close Friday, the USDA estimated the week’s beef production at 474.2 million pounds, down 0.5% from a year ago. June live cattle were lower all 5 session last week closing down by 1.925 cents. Support is seen between 80.40 and 80.80 with resistance at 82.50. May feeder cattle were lower by 1.20 cents last week. Resistance is seen at 96.00 with support at 93.80 followed by 92.90. We are advising clients to re-enter the cattle spread from previous weeks that we traded. Long August live cattle and short April feeder cattle; enter the spread between -1100/1075 and look for the spread to narrow exiting near -800.

After the close Friday, the USDA said that there were 65.389 million head of hogs on March 1st, down 2.7% from a year ago. The December to February pig crop was down 0.6% from a year ago, slightly more than expected. Pork production was estimated at 451.8 million pounds, down 1.9% from a year ago. June lean hogs lost 2.60 cents setting up a better long entry which we have suggested starting this week. We have multiple ideas in both futures and options but the bottom line is we are expecting higher prices.

Support is seen at 70.40 followed by the contract low near 69.50 with resistance at 72.50. We are expecting to see a trade up to 78.00 in the coming 30-45 days. See lean hog report from the previous week: The other white meat.

Continue Reading about Financials and Grains

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_____________________________________________________________________________________Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.