Oil Barrels Down Again

We hit a major milestone in the energy sector with the price of oil dipping under $70/barrel for the first time since roughly August 2007.

Just last week, the front-month crude oil futures contract (November contract) hit a low of $68.92 – $80 lower than its high price of $148.60 a barrel from July 11 this year. That corresponds to a change in equity of $80,000 on a single contract!There’s been some talk that OPEC will try to reduce supply at its next scheduled meeting, which is causing a temporary pop back in the market. Oil futures have since bounced to its current level of $75.50 a barrel.

Look For Natural Gas To Hit Support Levels

In other energy news, natural gas continues its seemingly never-ending slide, which started back in July.

If you thought the move in crude oil was big, then feast your bearish eyes on natural gas.  The front-month futures contract (November) has lost a staggering 8500 points, which translates into a change in equity of $85,000 on one futures contract.

Currently, natural gas futures sit at $6.820/mmbtu and have fallen as low as $6.500/mmbtu just last week, a drop from its July high of $14.000/mmbtu. Long-term value levels are getting very close for natural gas, since $5.000 is historically a good support area to keep an eye on.

Precious Metals Aren’t Doing What They Should

You’d think that metals would be doing well right now, especially gold. But if you’re betting on the market acting rationally right now, you’re likely to be disappointed for the time being.

Up until about two weeks ago, it looked as though gold & silver could be the only commodities that were actually bucking the bearish trend. That was until last week when both metals took it on the chin and fell hard. Silver dropped to new yearly lows, with gold almost matching its yearly low.

Silver currently sits at $9.70 an ounce, having touched a low of just above $9 an ounce last week. This is a drop of roughly $12.50 from its high point of $21.55, which it hit in March this year. That’s an equity move of over $62,000 per contract.

For a little while there, gold looked like it was going to come through and be the last savior for the metals group by hitting a high price of $936/ounce. It even had experts betting on whether it could launch itself to $1000/ounce.

While that is still a possibility, immediate hopes were squashed when the Dow went on its sell-off, causing gold to get knocked down to $772/ounce.  That was a quick $160/ounce move lower for gold. 

As Bear Rages, Grains and Softs Get Devoured

The rest of the commodities sector has faced the same bear attack. All the grains (corn, wheat, soybeans) have made new yearly lows, as well as the softs (coffee, sugar, cocoa, cotton & orange juice).

In fact, orange juice has retraced all the way back down to November 2004 levels, which are areas last seen just before the four devastating hurricanes ripped through the state of Florida.

We will see bottoms and value levels reached at some point, maybe sooner than we think.  All these markets have come down a long way from their peaks. But remember, if you’re going to play these markets, stick to limited-risk option strategies.

Lee Lowell – The Smart Profits Report.


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