Watchlist

Seasonal spreads are looking a little on the sleepy side at the moment. Grains are really getting very volatile at the moment as concerns over cold weather causing planting delays in corn and frost hurting wheat yields, seem to be dictating the action.

I've been heavily into energies recently with classic seasonal trades going into the traditional shoulder months for energy use and also increased gasoline demand headed into the driving season.

For now I'm just watching some more technical plays. Sometimes spreads can drift and get a jump as they head toward the end of a seasonal window.

Live Cattle/Lean Hogs

I'm somewhat bullish fundamentally on Hogs at the moment but like I said this as more of a technical trade.

Cotton

Cotton is generally quite a wild one to trade so it's best to work an order rather than chase. That said I like parity as a kind of pseudo support level and this one seems to be nicely positioned for a potential move in this bear spread. Fundamentally we need to be a little careful as weather is again playing its part. Plantings are currently at 14% compared to 20% traditionally on the back of weather issues. Again this was very much a technical trade.

Live Cattle

We were watching this one the other day and literally the following session saw a move our way. I felt working an order at 1.0 was a good play but it never traded at our price.

Soybean Meal/Oil

This one is more of a fundamental play. Soybean meal has taken off over the last week and we have seen some real strength. Soybeans look to be turning a corner as crush margins improve and supplies continue to be tight. I like this one if we can grab it on a pullback.

The market is watching a couple of key factors this week which really dictate the action. There's a Kansas grain tour that will be happening from Tuesday that will be giving traders a better indication as to any recent frost damage in wheat. And all eyes are on the weather regarding corn plantings. The consensus is that May 10th is the cut off date to have crops in the ground before we start seeing yield losses. If cold wet weather persists farmers are likely to switch more acres to soybeans which are able to be planted later.

It certainly looks like a big week in the grains.

Natural Gas

I've been riding this spread for a while now and I feel we are right on a knife's edge at the moment. Nat Gas has really been getting pushed around by inventories lately. After an extended cold period coming out of the winter we've finally seen a build in inventories over the last two weeks.

Hopefully this is a sign that this bear spread might be in play. However the worry is that with the extended cold weather the traditional shoulder period of lower heating demand has been reduced so we won't get the large move down that we've historically seen.

This spread traded as low as 71 on Friday but showed a little sign of a reversal in late trade. It's always dangerous when a spread can't close near the lows after a large push to the downside.

I'll be watching this one closely on Monday.

Watchlist

Today I'm looking at a bear spread in Live Cattle.

Live Cattle are cattle from the calf stage up until they reach the 600-800 pound mark, which usually takes around six to ten months.

In recent times cattle in somewhat of a downtrend. High feed costs have hurt farmers and as a result we've seen cattle numbers tighten as stock got sold off.

The trend in the front month futures has been down but we have seen buying continuing to come in around the 125.0 area.

In the above spread we can see that there is a seasonal window beginning on the 6th May. Price seems to be bouncing off 1.0 and looks to be a good place to try and enter.

It begins...

This blog is going to be a trading journal of sorts, focused heavily on commodities trading, general market news and overall sentiment. I've been trading commodity spreads for a year now and have a solid fundamental understanding and trading approach.

Prior to spread trading I was a short term "scalper" focused purely on the order flow. I traded predominately German Bunds and the Eurostoxx. I learnt on the Aussie SPI with some US Notes and Bonds mixed in there also.

Now all my attention is focused on what is essentially swing trading commodity spreads, based heavily on seasonal factors. I like to incorporate both a fundamental and technical approach to my trades and can hold positions anywhere from a few days to a few months. I'll generally have on between one and four positions at any given time, all of varying size.

For me I believe swing trading future spreads is what suits my personality, risk tolerance and skill set the best.

Currently I only take future spread positions, but going forward I'll also be incorporating option strategies based on fundamental ideas.

With this blog I'll be continuing to update my watchlist of trades, follow market news, as well as continually update my current positions.