With two months gone in 2011 how is your portfolio doing? Based on the fact that Crude prices cannot maintain $100 unless the plot thickens in the Middle East we would expect a good portion of the $10 fear premium to be stripped out of oil in the coming weeks. We’re not suggesting shorts but our bias has shifted in the short run. Those looking for a play are suggested to buy out of the money calls and puts to capitalize on a $10 move in one direction. On a trade back near $93 we would likely explore bullish plays for clients again…stay tuned. Natural gas traded to the 20 day MA for the first time in three weeks; expect that to serve as a pivot point. Our target for longs in May is $4.30. The 20 day MA is acting as a pivot point in the indices as well… we would stand aside for new entries until the picture is clearer.
A new 2011 low was established in the dollar…the next test will be support from early November about 1% lower than today’s close…stay alert. Live cattle were lower by 1% today but support held at the 20 day MA. Those not already long could use a break this week to scale into longs in June. We suspect lean hogs have 1.5-2.5% more downside before shorts should reverse and we will be looking to get long with clients. Gold was virtually unchanged in today’s session but silver was higher by just over 2.5%. At these levels we do not want to be long futures with clients but we entered some bullish option plays for a select number of aggressive clients in May silver with a target of $35/ounce.
It looks like sugar is on the verge of breaking above the 50 day MA…clients were advised to get long May today as we think a trade back near 31 cents/lb. is coming. Clients were advised to lighten up on their bullish corn positions booking a profit after the latest two day surge in prices. We will be buying back in on the next set back.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.