Batten Down the Hatches

Be cautious this week is going to get volatile! Day 1: the trend line held in oil today though it is too early to call for a reversal. A double bottom could be forming form yesterday and Fridays low; that level is just above $74 on the March contract. The only exposure our clients have is May $78/85 call spreads to take advantage of the $4-6 pop we anticipate in the immediate future. The fact that equities did not follow through lower was a positive but we still like selling rallies for clients. Prices may not get their but we suggest selling a rally in the ES and S&P between 1125/1135 on the March contract.
Expect fireworks this week with a full schedule of economic indicators both here and abroad. As for softs cocoa should move lower but we’ve yet to find the most advantageous way to position clients. Sugar did briefly trade above the 30 cent/lb level managing to close 3.5% higher on the day. On a similar move tomorrow we will most likely suggest profit orders on clients May call exposure. We are getting close to crying “Uncle” on the calendar spreads (short March /long July.) Clients are down just over $1000/per. OJ was higher by 2.5% today, clients should reach their profit objective on a trade above $1.50 this week. Gold and silver initially stood the test of support today; we suggest light long exposure looking to add if the market proves you right. Clients started buying June $1100/1225 Call spreads today at $3750-3800/per. We bought NO silver today; clients currently own out right calls and bull call spreads in May contracts. Continue to buy May and July calls and December futures in corn.
We could not resist the opportunity in the Pound as prices were up 0.70% on retail sales but the numbers did not look that good. We suggest selling rallies; we would only re-examine the trade on 2 consecutive closes above 1.6300 in the March contract, our target is 1.6000. Live cattle were lower but not enough in our opinion to exit puts or to start buying futures, on a breach of the 20 day moving average selling should intensify. Lean hogs were lower by almost 2% today; we feel there is more downside to come and have advised clients to hold their April puts.
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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