On Pins & Needles

These markets seem to change minute to minute…hour to hour…day to day. The 40 day moving average that we quoted yesterday was re-visited today and held in oil. Being that we did not make a new high we are still operating under the impression that prices need to move lower before we get any substantial upside. We would expect on a breach of $78 in April to see a trade down to $75/75.50. Clients are currently not long or short oil and are looking to buy on a dip. We did not move on natural gas futures today though we expect to be a buyer before the weekend. Instead this week those wanting exposure we are advising June $5/5.50 call spreads.
For the last 4 sessions stocks have been range bound between the 50 day and 100 day moving averages. We expect for prices to turn south and have positioned clients to take advantage of such a move. A close below 1090 in the S&P should signal a trade back to 1050. Sugar gained 3% today closing back above the 100 day moving average. As long as yesterdays low holds in the May contract at 23.49 we like being long. Unfortunately we did not get filled this morning buying back the 30 cent leg. Clients are still taking advantage of the upside but we would like to buy back that leg in the coming sessions.
July cotton was lower by almost 1% today; clients are positioned short expecting a trade back near 75 cents. We do not think Treasuries have moved high enough to sell but a trade closer to 118′00 in June a sale of 30-yr bonds should be on your radar. Agriculture recouped yesterday’s losses; the standouts were corn gaining 2%, soy meal 1.9% and wheat 1.6%. We continue to feel being long corn via options and futures heading into the next USDA report on March12th makes sense. Live cattle were lower for the second day in a row closing 1.7% off their 2010 highs from last week. Clients are positioned in options and futures to take advantage of a trade down to 89.00 in April.
A move above the 200 day moving average was rejected today in March silver. Prices could go either way; use $16 as resistance and $15.50 as support to help you navigate these treacherous waters. A close below $1100 today in April gold means we should see at least an attempt at lower ground; support is seen at $1080 followed by $1065. We still cannot rule out a trade back to $1045; a level seen just 2 weeks ago. We are not establishing new longs at this point but are holding August $1150/1250 call spreads and are slightly under water for clients. As to not miss a move higher in the Euro-currency in case we get one which we do think is long over due, we lightly bought April 140 calls today for clients for $762.50/per. On a move to 140 in the next 1/2 weeks these should be worth $1350-1500/per. We are not comfortable with futures being if things unravel in Europe a trade to 1.33 could happen. Worse case these options can go worthless; and again clients have a very small position.
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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