Has the Black Cloud Lifted?

We’ve had a challenging time trading of late as all seasoned traders sometimes go thru a dry spell. Natural gas may be the first market to turn in our favor, will corn or the S&P be next?
Fresh 2010 highs in Crude oil as prices have gained over $6 in the last 5 sessions. Taking a macro view it appears money is leaving Treasuries and is content moving into riskier assets. Bulls are in the driver seat as we should see a probe of $90/barrel in the coming weeks. Natural gas is back above the 20 day MA having gained almost 5% today and almost 50 cents of its low from Thursday. We are suggesting a small long position in May futures and 50 cent call spreads in July options. In the May contract our upside targets are $4.65, 4.90, and then a gap at $5.07 from February 19th.
Prices in indices are close enough that key levels may be hit (1200 in S&P, 11,000 in Dow and 2,000 in NASDAQ) but we maintain a major leg down is just around the corner. We’ve yet to move on sugar for clients but we should have some ideas in the coming days. The trend remains down in Treasuries but we think the better risk/reward trade is trading the short end of the yield curve; Euro-dollars. Continue to short 2011 contracts with stops above the recent highs.
Corn eked out a gain as a triple bottom may be in the making. Aggressive traders cover your May shorts, more conservative traders wait for confirmation of a bottom in the coming sessions. We still like the idea of long call options in July and long futures in December. November soybeans were down today but not enough to buy…stay tuned.
Remember to look for an exit on the December KCBOT/CBOT wheat spread when KC trades at a premium. Lean hogs and cattle are in a bull market but we would wait for a trade lower before gaining exposure.
Pullbacks in June gold that can maintain $1115 should be bought with a target of $1155-1165. It would take a move to $18.50 to get filled but we advised clients to put in gtc profit order on their July call spreads in silver. On the May contract use $18 as support and $18.50 as resistance. There are 4 central bank meetings this week so be mindful of that when putting on new or monitoring FX positions this week.
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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