Crude was down just over 1% today closing almost $2 off its highs. We continue to suggest selling near $80/barrel expecting a trade near $75 in the coming weeks. We suggest on futures to have stops above $81, in options clients own May $75/70 put spreads. Natural gas was lower by almost 3% and though we are playing with fire we still like lightly buying April futures; buy 1/4 to 1/3 of the ultimate position you want to own and then add to it when the market confirms you are right. As for option traders we suggest purchasing the June $5/5.50 call spreads.
We remain unconvinced a trade higher in Indices can hold and have advised clients to sell into this strength. We suggest scaling into shorts in the S&P at 1111 and 1125. Clients own June 1050 and 1000 ES puts and are slightly under water. We advised clients to buy back the remainder of their 30 cent sugar calls today. They booked a profit on their short 30’s and know hold May 25 cent calls and need a rally. The 200 day moving average held today in May at 21.92. Prices are oversold and have remained above the 200 day since April of 2009 when prices were under 15 cents/lb. Cotton was higher today but did mange to close 1.30 cents off its highs. Clients are positioned to take advantage of a break back below 75 cents this month. Bearish engulfing candles formed in the daily corn and wheat charts so a trade lower in the short term is likely.
Those that have yet to get in corn we suggest using this set back to get on board. 5 days running live cattle have closed lower; we may get a brief rally but sell it as a trade to 89.00 cents is what we are predicting in the April contract. I am confused in the metals; prices could go either way. We have clients lightly long both gold and silver but would be quick to exit on a close below $1106 in April gold and below $16.08 in May silver. For new entries we suggest trading light! The currency market is absolutely madness as 1-2% daily swings are common place in a variety of crosses. We continue to think the dollar is topping and as long as the Euro-currency can hold the recent lows we think a moderate bounce is likely; 1.38/1.39. The Pound remains the dog and should be sold on rallies but only for traders with a high tolerance for risk.
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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