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Commodities Corner: No Rest For The Wicked…Or Gas, Corn and Silver
Monday, July 21, 2008
by Lee Lowell, Futures Options & Commodities Specialist, Smart Profits Report
Welcome to another installment of our bi-weekly round-up of what’s been happening in the world of commodities. Once again, there’s been no shortage of wild action, so let’s get right to it.
Oil Resting For The Moment
The energy markets took a much-needed breather and retracement over the last few sessions. Since the oil market was reaching unsustainable heights, this was bound to happen, and it did.
Whether it continues to regain its lost ground and make newer all-time highs is yet to be seen, but it is still driving all the other commodities markets at this time.
Crude oil topped out at $147.27 /barrel (August futures contract) on July 11 and hit a low of $128.23 on July 18, knocking $19/barrel off its price. That equates to a dollar value of $19,000 on one futures contract. It currently sits at the $130.50 mark and is looking to make some consolidation here.
This chart shows it all.
http://futuresource.quote.com/charts/charts.jsp?s=CL%20Q8
Forget The Atkins Diet. Natural Gas Loses Weight All At Once
The other major energy player-natural gas-got walloped over the last week, shedding over 3000 points on the front-month futures contract. That equates to an astounding $30,000 on just one futures contract.
Just to give you a sense of the enormous amount of money flowing back and forth, keep in mind that there are traders out there controlling hundreds of these contracts at a time.
But while there could be a little more downside to go on this contract, it is getting close to an oversold level. Remember, we are right in the middle of hurricane season in the Southeastern U.S., so natural gas could pop back up at anytime.
Check out the chart below to see exactly what I mean.
http://futuresource.quote.com/charts/charts.jsp?s=NG%20Q8
Looking On The Bright Side
In our last update I commented on the current high price of corn futures due to the devastating rainstorms the Mid-West experienced last month. Well it seems that the damage might not have been as extensive as everyone originally thought, as the price of the nearby futures contract has taken quite a hit.
The U.S. government data and private farmers’ current assessments give the crop somewhat of a better chance of survival this season. In turn, this has sent the price of corn down over $1.75/bushel in the last two weeks. This is a dollar value of $8750 per single futures contract.
Of course, like any crop, corn prices are still very susceptible to weather factors, so any more disruptions to normal conditions can cause the prices to go right back up.
I’ve provided this chart for a closer look at its movement:
http://futuresource.quote.com/charts/charts.jsp?s=ZC%20U8
Hi Ho Silver; This One Is Going To Be Moving
And then there’s silver. Currently, the shiny substance-along with gold-is taking its cues from the oil market, just as everything else is.
But from a purely technical perspective, the charts show silver sitting on the 20-day moving average line and looking like it wants to keep going right on past its current breakout.
The luck of the Irish wasn’t with silver, as it had a very nasty fall right around St Patrick’s Day this year where it shed $5/ounce. While that might not sound like much, in dollar terms, that $5 move equates to a $25,000 change in equity.
Since that fall, silver has meandered in a $2/ounce range until we saw a recent breakout up to the $19.50/ounce level in just the last few trading sessions.
If the oil market gets back on its bullish horse, then we can possibly see silver take out that near-term high of $19.50/ounce. And it might possibly go even higher.
Keep an eye on that market and if you’re looking for bullish opportunities, stick with limited-risk option strategies.
You can see it edging its way upward again below.
http://futuresource.quote.com/charts/charts.jsp?s=SI%20U8
That’s all for this edition. I’ll catch you back here in a couple of weeks.
Lee Lowell
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