22 July 2019 MONDAY TRADE COMMENTARY

Greetings: MONDAY – 22 July 2019

General Economy: There could be a 50 basis-point cut at the next Fed meeting.  Such a cut is seen as a move to support the present market conditions rather than to avoid a recession.  The Fed chair Powell- said a rate cut would protect the present growth patterns of the USA.  This could mean more upside for Gold and Silver and the inflows of money into precious metal ETF’s (Exchange Traded Funds) are continuing.  Fed rate cuts would likely turn away from deflation and swing to a more inflationary time period. Precious metal investors do well in an inflationary environment.    Also this last week, the talks between China and USA restarted with discussions over phone conferences.

Grains: USA Farmers are holding on to stored grains and hoping to sell them at higher prices later in the year.  Though it is still expected the corn acres will be down 7 to 10 million acres, we won’t get any official word from USDA until the Monday,  August 12th WASDE report (noon Eastern/ NY time) which is expected to update planted acres from the special surveys it conducted in July.  The extremely hot weather last week and this weekend is expected to move out mid week and with the improved growing conditions, the market could see prices drift down.  The market may focus on the better weather instead of the expected prevent plant acreage loss that is expected.  This graphic (below) if form last Thursday’s morning show on Ag Day TV:

Should DEC19 CORN drift down this week, I could be shopping some of these (below) PUTs to sell:
NOTE: the “last X” is close Friday 7/19, and Prob OTM= prob strike expires OTM (out-of-the-money.)

Soybeans:  Historically, soybeans are very cheap between $8.00 and $9.00.  The expected prevent plant for beans is 2 to 3 million acres.  Bean stocks are very high and South American beans (Brazil mostly) are plentiful.  It might take a tariff talk breakthrough for any bullish action, but many believe even that won’t be enough for any high prices.  I need more information and development, though the beans were up 20 cents Friday, this is not unusual for the soybean market.  More study required here but I’m following closely.  If beans were to sell off a lot, I might look to sell PUTS.  From current prices, I feel they are just as likely to go UP or DOWN from here, so I’m aside for now, but watching closely.

Crude Oil: EIA Crude Oil stocks have declined the last five weeks, down 22 million barrels but still not much net movement on prices.

 see entire article at source: https://www.eia.gov/petroleum/weekly/archive/2019/190710/includes/analysis_print.php

“Crude oil prices are forecast to remain relatively flat

In the July 2019 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts that Brent crude oil prices will average $67 per barrel (b) in 2019 and in 2020. EIA expects that West Texas Intermediate (WTI) crude oil prices will average $60/b in 2019 and $63/b in 2020 (Figure 1). The forecast of relatively stable crude oil prices in the mid-$60/b range reflects EIA’s expectation that heading into 2020, global oil consumption will grow at a similar rate as global oil supply at current price levels. However, several risks to both consumption and supply could push prices out of this range.  (editor note from Don: the crude oil I trade “CL” is the WTI oil; it is normal for the Brent crude to trade a little higher than WTI.)

 

Gold: This chart (below) displays my current positions for Gold.  The 1800 CALL is the NOV19 class and will expire earlier than the short $1250 DEC19 PUT.   Even with Gold likely to climb more on the short term, I still expect the 1800 CALL to be high (far OTM) enough to collect premium between now and the October 18th, 2019 expiration: note: the PUT is a 1250 strike, earlier I had put the wrong number in.  This is correct now. – DAS

Summary of my Positions 22 July 2019:

  DEC19  Crude Oil short  90 CALL for .10 ($100)     

DEC19 Crude Oil short 40 PUT for 1.80 ($180)


Short  Gold NOV19 1800-strike CALL I sold for $110

Short Gold DEC19 $1250 PUT for 1.2 ($120)


 That is all for now.  If I get any real news on these ideas, I will send out an update.  I am already looking out into calendar 2020 at option strikes in order to prepare to sell more options over the next few weeks.  Good trading to everyone. Thank you. – Don

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Don A. Singletary

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