Pay close attention to the relationship between different asset classes and even different commodities, i.e dollar, oil, and metals. Our second objective at $77 in February Crude was reached today but prices did not stay there for long as oil reversed closing above $79/barrel. We suggest covering all remaining shorts and have yet to get clients long but we may have some bullish strategies to come. We still want to see a lower print in natural gas before issuing any buy recommendation, for those brave souls who remain short stay the course. For all energy contracts start following March as February goes off this week.
All losses in Equities were gotten back today on the major indices?? As we said in last week’s blog and this morning’s commentary we think a correction is long overdue but look for a close below the 20 day MA to confirm. So much for a reversal…sugar was higher by virtually 5% today. Those long the May contracts love the breakout to a new closing high but the calendar spread we advised got creamed losing 65 ticks ($728) per spread. As painful as it is we remain in the trade with clients for now. Clients were advised to roll out of their March longs in silver today and move to May. We like the idea of having 3 months time vs. 1 month as we do not have a good feel for price action in the immediate future. As for gold same story prices in the immediate future could go either way so we would scale down your position size until things are clearer. We remain longer term bullish to both metals. After the 12% correction in corn from last weeks USDA report we like being a buyer of May and July calls and December futures.
Continue to scale in to short exposure in Euro-dollars out till’ December 10′ and March 11′. As for currencies we’re getting the dollar rally we expected and forecast; see recent blogs. As for positioning clients are short March BP futures and were advised to buy March 94 cent CD puts. The BOC left rates alone at 0.25% today. Clients exited their February live cattle calls today, with only 17 days we could not weather a correction. We are still bullish but suggest June or August exposure. Clients hold a small position short April puts in lean hogs and on confirmation of an interim top we may suggest futures…stay tuned.
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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