Five consecutive lower days in Crude oil; on a breach of $72 in January a trade down to the September lows could be in the cards. Look for a higher trade in the dollar for guidance. We would advise booking profits in both futures and options on all remaining natural gas. Ideally traders took advantage of the 15% appreciation in the last 3 days. Soft commodities were lower across the board. Clients remain long sugar and short OJ.
We most likely will be looking for buys in coffee and cotton but not until next year.
Equity markets are lower as of this post with all US markets trading below the 20 day moving averages. We suspect lower action but are content on the sidelines with clients. For those who are short we would use objectives as follows: S&P 1060, Dow 9,900 and NASDAQ 1625. Another painful day for bulls in the metal complex with gold down by $30 plus and silver fading by 75 cents. An outside day formed in February gold that could carry prices down to $1100. We would suggest starting to scale into longs at that level. Buying $100 & $150 call spreads should also be on your radar. We are nearing a level that we would be comfortable getting long silver futures for clients. We should see some good resistance in the March contract between $17/17.40. Clients who have already purchased $2 call spreads hold your positions.
The KCBOT/CBOT wheat spread was a slight gainer; we suggest this spread as opposed to outrights until we see signs of an interim bottom. We feel March and May corn is a buy at these levels; March closed at $3.85 and May at $3.96. USDA report out Thursday morning. We entered March NOB spreads for clients today. We expect 30-yr bonds to gain on 10-yr notes for those not familiar with this trade. A trade over 122′00 in March 30-yr bonds should get clients the profit we’re looking for. Live cattle were lower on the day, clients may get stopped on their December longs as we have stop loss orders just under the recent lows. We’re still suggesting long exposure in February futures and options. 5 positive days in a row now in the dollar with prices gaining 4%.
We still like the idea of selling rallies in the Pound and Euro; as objectives as long as the dollar rally persists the Cable could see 1.6100 and the Euro could see 1.4500. Currency traders who bought the yen (see yesterday’s recommendation) should start looking for an exit. We expect to be exiting around 1.14/1.1450 in the next few sessions.
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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