Dollar Rallies Alongside Commodities

After 8 days of selling Crude is now oversold with the daily stochastic at 10 & 15 in the January contract. Clients have been advised to buy March $5 call spreads as we expect a $5 move higher in the coming weeks. Natural gas is too volatile for our liking currently. We will be looking to buy if prices come down 50 plus cents from current levels at the beginning of 2010. Nice follow through in sugar as a breakout is confirmed; sugar has appreciated 8.5% in the last 2 sessions to trade to it’s highest level in 7 weeks. Clients are positioned long March and May, we’ve suggested futures and options.
Play the breakout in equities expecting a 5% move in the direction of the break out. As we’ve recently said if February gold fails to penetrate $1100 in the coming sessions we would suggest lightly scaling back into longs and/or pricing out $100 and $150 call spreads. The line in the sand in March silver we at $17. We have clients in call spreads and will be getting long futures early next week with tight stops if the current lows hold. Corn took out the 20 day moving average with no problem and could over take the 100 day next week; in March at $407′6. We have clients long March and May and are first expecting $4.25 and then maybe $4.50, especially if the FUNDS get interested. Soybeans and wheat were also gainers on the day but corn remains the stand out.
Short Euro-dollars and have a small position into the FOMC meeting next week. Support held on 30-yr bonds and on a trade higher clients should be able to recoup some value on their NOB spreads which have been loosing in recent sessions. Just when you where ready to throw in the towel on live cattle longs we got MOOving to the upside with a 1.5% move today on good volumes. If prices are able to over take the 20 day moving average this could turn out to be a hell of a trade; in February at 83.45.
The dollar has had a nice run and shorts are being squeezed but what is all the fuss? The rally is just over 3%…big deal. The real story is the velocity and how one sided this trade was. The Euro-currency and Pound should suffer the most on a continued dollar rally though we think the bulk of the move has already happened. If we were not leaving next week we would be looking for long entries in the yen for clients. We tried today and lost $225 on a futures.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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