Defining Moment

The course some major markets chose in the next few sessions could determine where we go the next few months. The path of least resistance now with Crude oil above $82 appears to be up; we would not be surprised to see a challenge of $85 in the days to come. What was the ceiling now serves as the floor; the 9 day MA at $81.42 and 20 day MA at $81.62. Following a doji star on the daily chart yesterday natural gas put in its first positive session in the last 7 days. We started pricing out bullish plays in July options for clients today; $4.75 out-rights at $1250, $4.25/4.75 call spread ay$1650 or a mini-futures OR standard contract with stops below $3.75 in May.
Congestion in indices appears to be a waiting game for Fridays’ NFP #. Sugar traded above 18 cents for the first time in 1 week with prices closing just below that level. It appears buyers are emerging and if this continues we will look to deploy bullish plays in July and October next week for clients. Bearish engulfing candle on the daily cotton chart; tomorrow’s USDA will determine where from here. Our bearish bias exists with a target of 3-5% lower. Mixed bag in agriculture as traders jockey for position into tomorrows USDA planting intentions. On a new low today we advised clients to sell 1:1 May corn futures against their December longs. We want to be spread off into the report. This is not necessarily neutral but the spread has not budged more than 2-3 cents in the last 2 weeks. On a bullish report clients will trade out of their May protection at a loss and hold December and on a bearish surprise they will be glad they have May shorts as we could see prices re-visit their September lows. We feel an acreage number under 88.5 M would be bullish and above bearish.
Stand clear of trades in live cattle or lean hogs until the dust clears. In the last 4 days copper has moved almost 25 cents higher taking prices to fresh 19 month highs…I ask why? We will continue to advise clients to sell into strength anticipating that months from now prices will be substantially lower. Looking at a monthly chart for the last 8-10 years May appears to be a pivotal time in copper so we could see more upside in the immediate future. Clients are trading December positions so this play is much longer than most of our trade recommendations. May silver closed above the 100 day MA for the second day in a row but looking at the action over the last 3 weeks we’ve had trouble maintaining above that level. We still feel we could see a major washout before seeing higher ground…be careful. Look at the last NFP # on February 5th May silver lost 66 cents, could this Friday hold a similar outcome. Past performance is not indicative of future results. Gold closed slightly lower yet remained in the $25 trading range that has existed for the last month. If this pattern holds we should see a move back to $1085 on the April contract. Currencies were flat; we see nothing new to report.
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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