Dollar could be a Game Changer

Huge build in Crude inventories and still oil held it’s own with May probing $80/barrel but it appears we will close above that level. Our negative bias still exists but what will it take to see a trade to $77/78 is beyond me. Natural gas looks to be building a solid base just above $4. The risk/reward at these levels favors longs in our opinion. We are suggesting scaling into May futures with stops just below the recent lows and purchasing June 50 cent call spreads (i.e. $4.25/4.75).
Indices look overbought but have for weeks now…brave clients are sticking with the June put options. Today they purchased June 1050 ES puts for $550/per. Sugar came within 17 ticks or 16 cents and then closed 9% off that low. Buyers were active but I want to ensure this is just not another head fake before trying to get clients long again. May cotton is back below the 20 day MA losing 1.50 cents today. We are expecting further down side and have a target or 78.00 and then 76.00. OJ paired losses but did close lower now for 7 out of the last 8 sessions dragging prices back below the 50 day MA. We have told clients that we are interested in re-visiting longs under $1.30.
Treasuries were hit hard across the curve today; likely due the exorbitant auctions. We may NOT get the opportunity to sell from higher levels as we had expected but if prices continue south it will be without our clients. Corn and KCBOT were the lone agriculture commodities to keep their head above water today. You know the deal; we are suggesting long exposure via futures and options in July and December corn. Some of our clients that trade spreads may be interested in this: long December KCBOT wheat against a short in December CBOT wheat at 7-9 cents under expecting the spread to flip and KCBOT to be at a premium. Let cattle rally a little more and look to fade the rally; June would need to be contained at 94.00 and August at 92.00 or we would abandon the trade. Lean hogs continued lower; we expect a trade under 70.00 in coming sessions.
Precious to industrial metals were hit today; gold 1.70%, silver 2.6%, copper 1.5%, palladium 4.7%, and platinum 1.8%. We are looking for more downside pressure in this complex especially if the dollar can stay above 82.00. The significance of the 82 level in the US dollar index serves as the 50% Fibonacci level for the last 2 years. Use 81.25-81.50 as support with 84.00 as the next stop on the upside. The Yen got hit the hardest today and though I did not take people seriously who were whispering par just weeks ago this could happen. We are pricing out bearish plays for clients. If the Loonie can break the 20 day MA; at .9740 in June we should be on our way to a nice winning trade on clients June 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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