Gold sets the Tone

Crude looks poised to move higher but before committing capital we’d like to see the inventory report tomorrow. We feel that without any bearish developments the recent test of $75 could prove to be support. We’re tracking bull call spreads in addition to selling puts and buying calls. In the last 9 trading sessions natural gas prices have moved up 65 cents only to reverse and move back down 55 cents. This is terrific if timed properly but the leverage is huge so be careful. We like the idea of buying February and March 50 & 75 cent call spreads but have yet to move on behalf of clients…stay tuned.
Though sugar was quiet today we like the idea of long exposure via out right calls, back ratio spreads or long futures with stops just below 21.80 in the March contract. Lumber may be correcting closing $14 off its highs. We prefer to be a buyer of cotton from lower levels, closer to 68.00 in March would be ideal. Prices appear to be moving lower. Equities have traded back to the top of the recent trading range. Those who have not taken shorts off in the S&P we would suggest stops at 1113.
Gold has traded above $1200 closing just below on the February contract. The question is now that this level has been achieved will investors book profit or will new buyers take gold to higher levels. All clients that are long futures are suggested to have some sort of option protection. Silver broke to new highs today; the May $3 call spreads gained nicely though we may be looking for an exit door if tomorrow is anything like today. 30-yr bonds were lower by just over 1 basis point, we would like to see that type or movement on the short end of the curve as we have clients positioned short Euro-dollars.
I would think if equities move higher Treasuries would trade lower though we have no exposure currently with clients trading the long end of the curve. We’re anxious to get clients long corn but suggest waiting for a break, furthermore we may trade May as opposed to March…stay tuned. The KCBOT/CBOT wheat spread picked up marginally today; again we’re suggesting that KCBOT will gain on CBOT. Not a pretty trade in live stock today, well for our clients anyway.
Live cattle were lower by just over 1% and Lean hogs were higher though only by 8 ticks. Our stance is February cattle should move higher and February lean hogs should move lower. We used the rally in the Pound today to get short futures for clients above 1.66 and to buy December 165 puts expecting a trade down to 1.6450 in the coming 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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