Are the $ Correlations Back?



The dollar cut thru the 20 day moving average like a hot knife thru butter and in just 2 days erased the previous 2 weeks of gains. The dollar is in control of the destiny of commodities in the short run. As we’ve voiced in recent posts we expect sideways to down in the dollar and the 9% appreciation since the first week of December was a gift. The Pound and Euro should catch a bid from here but I’m undecided if I want to be involved with clients. We still could get a trade to 1.38/1.39 in the Euro but my clients will be absent. They took a profit on their April calls today. If the Cable was to fill the gap from Sunday at 1.5232 we will likely get short for clients. They still hold June puts in the Yen and will try to navigate there as best as possible; we are looking for a trade to 1.10 in the coming weeks.
Depending on how tight you ran stops you were likely stopped on your April crude shorts. We think a move lower is likely but prices may stay afloat if the dollar moves south. Clients still hold May put spreads. We advised clients who were not already involved in natural gas to buy June $5/5.50 call spreads or April futures. It may be contrarian but we still like selling rallies in the Indices; our vehicle of choice is the S&P and ES. Sugar traded 2.6% lower but the 200 day MA held. Clients are buying here expecting a trade back above 26 cents in May; current price 22.05. The 100 day MA has held for the last 2 session in 30-yr bonds at 116′24. We are looking to be a seller from higher levels for clients. Those more aggressive then me could buy and run stops under to 100 day MA. We expect sideways action in the grains in the coming sessions but would advise a small long position into next weeks USDA. If forced to pick just one we suggest corn. Live cattle traded back within 1/2 cent of its contract highs; we are sellers still with clients expecting 89.00 in April.
April gold ticked slightly higher today, this allowed us to exit stage left. We advised clients to book their profits on all gold longs and move to the sidelines and wait for a set back to get re-positioned. May silver traded to its 100 day moving average but failed to penetrate. We advised our more conservative clients to book profits on their May positions and our more aggressive clients to roll their May out to July contracts. This allows them to take advantage of further upside but have time in case we get a correction.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.