Chasing Alpha

As we get into the second trading month of the year where are investors seeking returns? The 5% correction we’ve seen in Crude has been fairly orderly and we suggest using this set back as a buying opportunity. Aggressive clients were advised to buy a combination of futures and options today in May, June or July contracts. Natural gas was hit by an additional 4% today…we still favor a probe of $4 before establishing bullish plays for clients. As we wrote in our 2011 outlook we will be a buyer below $4 for clients and a seller above $5 for clients.

A fresh 2 1/2 year high in the indices…the BULLS remain in the driver’s seat. We are content on the sidelines and do not wish to add any exposure for clients. The dollar rally stalled today but we are looking for higher trade still. Aggressive traders can continue to fade rallies in the Cable and Euro. Our targets are 1.5800 and 1.3350 respectively. We are thankful we advised clients to exit their live cattle last week as prices are down just over 1% today. We will be looking to be a buyer from lower levels this week or next. On a breach of today’s trend line we expect to see a 2-4% further depreciation. Silver was marginally higher gaining six out of the last seven sessions. The significance of today’s action was a settlement above the 40 and 50 day MA. We should see a trade back over $30/ounce this week in the March contract. April gold will need to retake the 100 day MA; in April at $1361 to see higher ground…stay tuned.

Cotton was limit higher today picking up just over 4%. Our profits are no longer for clients in May put spreads. We will hold but recognize this will be an extremely bumpy ride. The trade was no as bad in coffee as we’ve been advising clients to gain bearish options exposure there as well anticipating a 10% correction. USDA report out Wednesday, get in the position you want today or tomorrow. We will be mildly long corn with some clients and have advised March put options in case we get a bearish surprise. In the debt complex we suggest bearish exposure in the short end of the curve.

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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