Tuesday, July 30, 2013

Natural Gas

The latest weather forecasts are showing a period of cooler than average weather which is having a positive effect on our bear spread.

After a short stint of above average temperatures in a couple of US locations, the next 10-14 days appear to be less supportive and as a result NG has fallen over the last few sessions.

This is a good chance to get out stop to break even and let the next month of seasonality play out.


Monday, July 29, 2013

New Trades

Lean Hogs

Hogs have been moving steadily higher over recent months in what's been a standard seasonal move.

Grain prices have been high and that's also been a factor however I think we're reaching a bit of a top.

This looks a nice seasonal pattern with a solid window. This one's been a winner 14 of 15 years and I think we can risk $1000 per contract or 100 ticks (2.5 points)
Copper

This isn't a common one but I like the seasonality combined with the correlation with economic factors and especially China.

China is a large importer of copper and recently we've certainly seen s slowing down with their economic data.

We can risk $400 per contract or 32 ticks according to the historical data but I'd like to see the stop slightly above the most recent high. That puts it at 0.7 on the chart below or $875. This one's been a winner 14 out of 15 years.

Friday, July 26, 2013

Watchlist

Lean Hogs


























Kansas Wheat / Chicago Wheat
Copper


























Heating Oil / Crude Oil

Soybeans

So it's fair to say that this one has been a wild ride - especially over the last week.

Unfortunately we managed to get stopped out mid-week after everything was looking reasonably promising. And as you can see on the chart below there have been some seriously large intraday moves.

Soybeans began getting bid up after cash supplies starting getting tight. We could see that cash was trading at a premium to the futures. In my experience this has always been a worrying sign when trying to get short a spread. We saw something similar earlier in the year in corn and got stopped out on that occasion in similar fashion.

The frustrating thing here is that soybeans then proceeded to sell off in huge fashion (limit down) after everyone in the cash market decided to take some of the higher prices on offer and hence crush the cash market.

It's a shame as our spread is trading at the similar levels to last week and we effectively just got stopped out in the midst of the chop.

But that's trading...



Sunday, July 14, 2013

Updates

Things have been somewhat smooth going this week (touch wood) and we even managed to get a reasonably favourable WASDE report in the process.

Soybeans


























The WASDE report came out reasonably bearish for Soybeans which was nice for the spread and the underlying.

There is concern over the tightness of current supplies and that has lead to some strength. Weather has also been playing it's part with some concerns over excessive heat, which appear to be slowly changing to more seasonal conditions.

We can move our stop to break even on this one.

Natural Gas


























This one has really been grinding along slowly as we move through our extended seasonal window.

The most recent outlook has seen hot temperatures in a number of areas, however that has been somewhat offset by the rising inventory levels which are now virtually in line with the 5-yr average.

As such we will maintain our current stop at -23.6 and let this one continue to play out.

Live Cattle / Lean Hogs



























This one has been drifting along nicely to date and we saw a nice move our way on Monday.

Since the July 4th run-up things seem to have changed for hogs and demand is somewhat reduced.

Stop to 36.5.

Wednesday, July 3, 2013

Watchlist

Copper

There are two reasonable looking Copper spreads that I've been tracking.

Copper has a certain link to the economy and construction and I wouldn't be willing to enter either of the spreads ahead of Friday's jobs number.

We also have a historically large net short position in Copper. This could potentially lead to a short covering rally. Something to consider.


 Corn

This is our old corn spread which is still looking reasonably decent. Volatilty was huge around the grain stocks and acerage on Friday and there have been some big moves since.

The reports were bearish for corn however I would probably like a better price.

It does look ok on the charts however I'm not sure I want to take on the added risk.

Just watching for now.




Natural Gas

We've seen the spread and underlying pullback over the last few sessions. There's been some extreme weather in the US which has been supporting prices.

From Dominick A. Chirichella of EMI
The main storyline for Nat Gas has been the ongoing heat wave along the west coast as well as the changing short term weather forecasts. For example in California residents are being asked to conserve energy for the second day in row as temperatures are soaring over parts of the western region of the US. 
The latest NOAA six to ten day and eight to fourteen day forecasts continue to be more supportive than those released late last week. The current round of forecasts are showing a modest area of above normal temperatures along the east coast along with an ongoing heat wave out in the west. 
The middle of the country is still calling for normal to even below normal temperatures. This set of forecasts does suggest that there will be a higher level of cooling related demand than the forecasts from last week. If the forecast holds and the actual weather turns out to be in sync with the forecasts weekly injections during the forecast timeframe could underperform versus history.
We'll keep an eye on this one over the coming weeks. It still has a decent seasonal window left to run.

Soybeans

I've been watching this spreads progress prior to Friday's quarterly numbers, with a view to entering this week if things weren't too crazy.

From the Hightower report:
The report was seen as neutral to slightly supportive against trade expectations. However, weakness in corn and the outlook for improved weather ahead helped to push futures lower after the release.
US soybean planted area came in at 77.728 million acres as compared with trade estimates near 77.925 million acres and up from 77.2 million from the March intensions. The range of estimates was 77.1 to 79.2 million acres. 
June 1st Quarterly Stocks came in at 434.5 million bushels compared with trade expectations at 442 million. This is down from 667 billion last year. The high end of the trade estimates was at 500 million bushels with the low end at 413 million.
This effectively gave as a slightly better price in early trade Monday and I was able to enter at a touch better than 51.

We can risk around $600 per contract on this one, which is 12 points. That makes the stop 63.