The Curtain on Q1

Yes folks believe it or not Q1 is over this week. Crude is convincingly higher closing above the 9 and 20 day MA for the first time in 8 days. We are abandoning all short strategies as we said we would on a close above $82 in May. That is not to say we are getting long we have advised clients to move to the sidelines. Buying was rejected in natural gas today with prices as of this post off their lows but 10 cents off their highs. We are almost at our threshold for pain on longs so we most likely are close to turning around. New entries are advised to look at 50 cent call spreads in June; i.e.$4.00/4.50 or $4.25/4.75.
Indices were all higher on the day but have yet to get above last Thursday’s highs. Whether we move higher or lower from here will likely be up to Friday’s NFP #. If sugar is able to form a solid base this week we will re-examine longs in July for clients next week. OJ continued its slide south as prices penetrated one key support line today. We see the next major support in the May contract about 10 cents lower. On a 3-5 cent pullback in coffee we would be willing to start moving on July 10 cent call spreads as we feel the market may be pricing in a frost premium for the crop in the Southern Hemisphere. Corn and wheat were virtually unchanged on today’s session but soybeans and the products were marginally higher gaining 1-2%.
The standout was soybean meal; July should make its way to $300 as long as the 40 day MA at $264 can support. The livestock sector caught fire today on a friendly hogs & pigs report that came out after last Friday’s close. Lean hogs and pork bellies were up the daily trading limit. If shorts in lean hogs tightened up their stops as suggested they should have been stopped at a profit on the open. Based on the current action we are neutral on live cattle and would wait for the dust to settle before establishing new longs or shorts.
Perhaps the most impressive moves today was in the metals sector; gold was the weakest performer but still was a marginal gainer, silver was higher by 2.8%, copper by almost 4%, platinum by 2% and today’s winner was palladium that erased last weeks losses by gaining over 4% today. We suggest waiting for confirmation because talking to some seasoned metal traders today this came out of nowhere. The US dollar is back below 82 and as expected on that int’l currencies caught a bid. We suggested trading small size and utilizing stops as this does not feel right.
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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