Weaker than expected data reported in the Chicago PMI along with sagging consumer confidence managed to keep selling pressure muted. As a result, Treasury bonds and notes spent early morning trade grinding higher but failed to ignite momentum trade. Despite the uptick in equities, safety players saw no reason to ditch coupon paying Treasuries.

As this report was being written, yields on the 30-year bond were hovering near 3.57% and the 10-year note near 2.70%. At these rates, investors will be lucky to yield a positive real rate of return (return after inflation). However, that doesn't necessarily matter in today's climate. Remember, consumer confidence is lingering at historically low levels and many consumers are also investors. Their lack of assurance in the free markets may continue to lure them into capital preservation plays such as Treasuries in the near-term. I am not necessarily advocating investments in Treasuries, in fact I am not. However, traders may find it beneficial to play the upside for now (or at least avoid the short side).

Have things gotten better? I don't know, but investor's confidence has returned. It's not so much that things have improved dramatically, but rather that investors are willing to take some risks now that we have gotten more clarification from Bernanke, Geithner and Co. After weeks of waiting, we finally received more details on the programs that the government is trying to institute in order to remedy the problems at hand. The chatter has been on the recent rally in stocks but low and behold look at the recent uptick in a range of commodities. Looking at the CRB Index ytd, it has out performed stocks moving 8.5% lower when the S&P is off 10%. Bottom line, money managers and investors alike are looking at commodities as a way to hedge against the coming inflation in addition to diversifying their portfolios.

Soft red winter wheat futures at the Chicago Board of Trade have slumped this week to produce fresh near-term technical damage. The May futures contract this week has shed over 40 cents in value as of Wednesday's close. The next downside price objective for the recharged wheat bears is to push and close May futures prices below strong technical support at the March low of $4.98 1/2. A close below that level would produce more chart damage to suggest a price move to the contract low of $4.84 1/4, which was scored in December.

A lack of demand for sovereign debt and a poor showing in domestic auctions left Treasury futures vulnerable. The Fed issued $34 billion in 5-year notes and are expected to issue a boatload ($24 billion) of the new 7-year note issues. As we have also pointed out, corporations have been scrambling to sell fixed income products to raise cash for operations. The result is an overwhelming amount of market supply.

After months of speculation, the Fed finally began purchasing long dated Treasuries. However, it almost seems like old news at this point and traders are wondering whether the Fed's bark was much larger than their bite. Traders hardly even blinked at the $7.5 billion in notes purchased by the U.S. government today.

Lean hogs are traded on the CME, one futures contract is equal to 40,000 lbs which is a whole lot of swine. Every penny in lean hogs equates to $400, the current price of June lean hogs is just under 73 cents. Prices for this contract month ytd have been just above 80 cents and just below 70, so currently prices are right in the middle of that range. While past performance is never indicative of future results, sometimes patterns appear when trading certain commodities and what I'm about to outline in hogs should be incredibly compelling. This is not to suggest that one can buy lean hogs and have any assurances that money will be made, but when weighing the risk vs. reward being positioned long lean hogs in March into April it's worthy of a second look.

Taxpayer revolts have historically been a problem for many countries. The USA's history of a taxpayer revolt much began with the Colonist revolt against the "Tea Tax" or the "Stamp Tax" as it was called, resulting in the colonists flooding theBoston Harbor with tea. The "Stamp Act" was passed on March 22, 1765. Have we not learned anything from those events? We should not forget that taxpayers can and will revolt. We hear much in the way of grumblings from tax payers who, are overburdened with leverage and see no relief. The last thing a tax payer wants to see is the government bail out the crooks. Flooding the system with dollars has several results. The primary result is to inflate the markets so that the investors feel a little better. It is thought that with this open-spigot financial plan that lending will again resume in earnest, and just in time for spring house buying season. We have yet to see the lenders open their doors with lower rates, enough to encourage more refinancing and perhaps some buying. Truly, that market in real-estate looks cheap, but alas it could get cheaper. The Northeast has been blessed with a continued firmish market. That said, we must remember also that the Northeast is just beginning to feel some of the pain of the massive lay-offs in the financial industry.

The Fed's surprise move yesterday has changed the financial landscape. Their is an old saying on Wall Street which says don't fight the Fed. Clearly that was the case yesterday. While the Fed is doing everything in it's power to ensure the economy does not implode the immediate reaction is the US dollar selling off sharply. We expect this devaluation of the UD dollar to continue which should translate into higher commodity prices going forward.

The bias in the equity markets continues to be toward the upside short term. Expect strong resistance for the S&P June contract at the 800/810 area. With option expiration tomorrow expect a lot of volatility. The typical pattern is a lot of movement the day before expiration (which is today). While we will get a significant pull back as the market looks for a bottom we are not expecting that to occur until early next week. We continue to trade the support and resistance levels.

March 18, 2009 - New York , NY - The Hennessee Group LLC, an adviser to hedge fund investors, believes silver is currently underpriced relative to gold and is therefore advising clients to accumulate positions in the precious metal.

Charles Gradante, Co-Founder of the Hennessee Group, stated

"While we see both gold and silver as safe haven investments, particularly as a hedge against the longer term risk of hyper-inflation, we believe gains in silver will outpace gold." Gradante added, "The gold to silver ratio has reached elevated levels in recent months due in large part to gains in gold. And while we expect gold to continue experiencing gains, we anticipate silver to outperform on a relative basis and lead to a reversion in the gold to silver ratio."

The Federal Reserve reported that the net worth of US households was down 18% in 08', the biggest drop in 57 years of record-keeping. You can no longer expect to gain 10% a year on your real estate, buy and hold no longer works in the stock market and 3% on long term Treasuries is not the answer. So where do investors go? We think an acceptable alternative is commodities. Whether it is a speculative account trading agriculture, exposure to precious metals, hedging your stock portfolio or an allocation to managed futures we believe investors should have 5-20% of their portfolios exposed to commodities. We are not advocating to blindly allocating a portion of your portfolio or replacing a stock portfolio with commodities, but rather to inform yourself because we expect inflation in the months and years to come. Although past performance is not indicative of future results, commodities have tended to outperform other asset classes in times of inflation. Bottom-line, with a growing population and a finite supply of commodities we expect the price curve to trend higher.

It is no wonder that the banks are making money these days. They have a 6 or more point spread between where they are borrowing and where they are lending. If we look at the credit card spread; it balloons out to an average of 12 basis points. Not a bad return. As to the toxic assets on their balance sheets, some will turn out to be non-toxic and some will be toxic. If you have some free cash available and would like to gamble, you might just have good odds on the returns of 2 out of 10 toxic assets. In other words, should you buy a portfolio of say 10 toxic assets, for cents on the dollar, odds favor that 2 out of the 10 might just be good. So, if you paid 20 cents on the dollar for 10, that is 200 cents and two turned out okay, you would have your money back for the total cost, which is considering that 8 would be worth zero. Now say we are too gloomy and maybe 3 survive, you will have a winner. Again, we said gamble, this is not for investing but simply a shot at a possible gain. If you can afford to lose the entire amount, and are willing to take that chance, this could be an interesting gamble.

John Kurgan has over 24 years experience in the investment business with the last 19 years of his career spent at MF Global or its predecessor Refco Futures. His extensive knowledge and experience in the complex world of futures has proven to be of great benefit to clients during these very uncertain times.

John's investment philosophy combines macro fundamental trends with technical analysis to provide his clients with sound trading strategies. He believes that a huge factor in successful trading is finding the proper balance between risk and reward. Sound money management techniques are more essential now than at any time in recent investment history.

For all you superstitious traders we are Friday the 13th and also the last trading day before the Ides of March (15th). It doesn't get and more spookier than that. Yesterday's huge up move was a continued combination of short covering and sideline cash that does not want to get left behind. The question one has to ask is how much father does this move have to go?

We continue to be long the market medium term as we believe there is still pent up buying. Given the strong gains over the last three trading days the prudent trading strategy is to continue to trade with a trailing stop. We have option expiration next week which will add to the volatility as a huge Index Arb Fund that is currently frozen will have to be unwound before next week's end. Expect more back and forth action today with the possibility of profit taking going into the weekend.

As a trader, one must control that little voice inside that is saying you have missed the bottom and the Stock Market freight train is now quickly leaving us behind so we had better buy. Expect at some point a retest of the Market low (on the S&P that is 666 just to add to the superstition of this market).

Stock index futures started the day yesterday on the right foot and ended in the same manner. After Tuesday's monster rally, many bears were looking for a repeat of the one-day rally phenomenon. However, aside from a few temporary dips to 712 the March S&P traded in the green the entire session. It was pretty apparent that there were a lot of traders caught on the wrong side of Tuesday's rally and on each dip they were scrambling to cover any remaining shorts. Judging by the incredible number of speculative shorts, particularly small speculators, we could have some room to move on the upside as the bears are squeezed.

If you are trading stock index futures, the June contract officially becomes the front month tomorrow. You will begin seeing traders roll into the June contract from March and the liquidity will go with it. The March contract will be tradable through the 19th; however, we recommend that you exclusively trade the June contract by Friday of this week or early next week at the latest. Option traders will be able to easily buy and sell S&P options through the trading session on the 19th but Dow and NASDAQ options which struggle with liquidity will begin to get thin much sooner.

Yesterday's Stock market rally arrived right on schedule. Actually it was the most anticipated "bear market rally" in the history of the stock market. This of course leads one to be suspect on whether this rally has any staying power. the main thing to watch is the volume. As it begins to decline so will the advance. For the past several months the Bears have had it easy as they have not had to deal with the market moving against them. From that perspective the trade of being short the Stock Market was becoming a little one sided as was the opposite fear trade of being long Gold or US Treasury Bonds.

Going forward expect some follow through on the upside for the Stock Market and will continue to be lightly long with a tight double stop that would take us out of long position and reverse us to a short. We believe that regardless of how the future unfolds a test of the low is somewhere in the markets future. We should add hat we believe it might be the near futures as the Bears are well capitalized and a capitulation sell off would finally shake out the final group of buy and hold believers.

May soft red winter wheat futures at the Chicago Board of Trade are still trapped below a two-month-old downtrend on the daily bar chart. For the bulls to gain some fresh upside near-term technical momentum they will have to negate the aforementioned downtrend, which means pushing May futures prices back above the last "reaction high," which is located at $5.44 3/4. A close in May wheat futures prices below solid technical support at last week's low of $4.98 1/2 would produce fresh near-term chart damage to suggest a challenge of the contract low of $4.84 1/4, or below.

This is not about more taste or less filling but rather the more government involvement and meddling in the markets the less likely we will get a prompt recovery and return to a sustainable economy. What should be on your radar this week is the USDA report, and the approaching OPEC and FOMC meetings. If the stock market delivers a significant short covering rally, look for commodities to gain confidence. It isn't so much that these markets will follow equities, but rather if we can get a rebound some reassurances may return that have been lacking since the new Administration took over. Citing an article from last week's WSJ, current practices have been more of triage and life support as opposed to repair and recovery. Conceivably if circumstances were to change, further risk taking would return to the market as opposed to the blind ambition and hopes on improvement with little evidence.

This is the first post on Commodity Trader from the Platatude dude.

I am perhaps the most famous "wrong way" trader.  Legions of followers from professional floor traders to a post-menopausal womens' investment club in Fargo, ND have used the dude's investment and trading advice as one of the most reliable contrary indicators around. :)

I'll have specific actionable trades (for you to fade :) ) later this week.  However, I wanted to point out a potential double top ...

Coffee prices have been predicted to rise in 09'on expectations of smaller supplies around the globe being that the 09-10' harvest is an off year. Demand seems to be inelastic: when coffee prices rise individuals don't tend to reduce their coffee consumption accordingly and when the prices fall, consumer demand does not seem to increase to any great extent. We'd only suspect a significant reduction in demand if there was a substantial increase in price as consumers seem to be tightening their belts.

As of yesterday's close the front month contract is trading at $1.04, just above the 50% Fibonacci retracement level, assuming the low in 01' and the high reached in 08'. Seen in the July Coffee chart below we are trading at the bottom end of a 15 cent trading range that has contained prices for the last 5 months. We are expecting these levels to hold and have been advising clients to start working long July contracts either via futures with option protection or by purchasing 20 cent bull call spreads. On the second chart you can see that if we do see prices start to range higher and get thru the $1.20 level, which failed on the last attempt, there is little in the way of resistance until $1.55/1.65.

With the Stock Market sliding below 7000 for the first time since October, 28th 1997 all
Economic indicators suggest their will be more potholes before the road to recovery begins. The Presidents "stimulus plan" appears to have the support of many "Main Street" citizens and that has been reflected in his approval ratings.

However, Mr. Bernake has called the AIG BAIL-OUT for the fourth time crucial in the forward progress of this countries economy. We also see Citigroup, Bank of America, and the United States Auto Industry to name a few who also have received Federal BAIL-OUTS. The Gross Domestic Product (GDP) has fallen to a 20 year LOW. Not to mention the 2 Million plus JOBS lost by American workers and the staggering amount of Home foreclosures. I believe "There needs to be accountability "on all sides.

The recent Treasury rally was quickly reversed as stocks managed to find support. Once again, bonds and notes are wrestling with the impact of supply and economic turmoil. In recent months, supply has been the dominate story but it is uncertain as to whether that can continue to be the case.

We have been noting seasonal strength and the possibility of a sizable rally. However, time appears to be running short for this prediction to play out. Beginning in mid-March seasonal tendencies shift from bullish to bearish.

There is a significant difference between preservation and appreciation. In this environment traders/investors must be at the top of their game as unpredictability is widespread and the magnitude of movement in all asset classes is voracious. We want to expand upon one of our posts from last week titled, "nerves of steel", you must have conviction and do your homework before putting on a position as your nerves will perhaps be tested instantly. Don't let the market noise shake you out of your positions. Although the public assumes there is little opportunity in current conditions, we are seeing tremendous opportunities, more frequent now than ever. Be alert this week as a number of Central banks meet on rates, NFP will be issued on Friday and stock indexes, the dollar and oil are all at critical decision points establishing their next course.

The gloomy news from Washington continues snuffing out every rally that is attempted. Every time an elected official speaks the market retreats. We now have "The Obama Indicator" which continues to signal oratorical excellence paired with market depression. As our silver tongued leader speaks the market retreats. So what is a few trillion here or there we will tax the rich to pay for the poor and middle class. All we need are some green tights and Robin Hood will appear.

Tax and spend is the mantra for the government and, should the proposed tax increases become law--run and hide will be the mantra for corporations and the wealthier citizens. Speaking of citizens it is likely that both our corporate citizens as well as our wealthier citizens will seek residency elsewhere. Residency in a place that doesn't punish success and seems more equitable. We can remember a recent time when many corporations fled to Ireland for the benefit of a lower tax rate. In truth most corporations will remain domiciled where they are now, but some adventurous companies will decide to leave our shores for friendlier lands with lower corporate tax rates.