Less Could be More

My suggestion is do your research and put on smaller positions and participate in less trading as the volatility can clean traders out if they trade the same as they did in times past. As of this post Crude is higher by 3.5% trading to its highest price in one month and above the down sloping trend line mentioned in previous posts. We could see further upside lifting prices to $90 so do not add to shorts until we see if this is a false break out or significant trend change. The products were higher by 3% as well today with heating oil back over $3/gallon and RBOB approaching its August highs. We think prices have gotten ahead of themselves but we would not fight the move with the distillates as two weeks ago an interim low was established. We suggest buying breaks and instituting additional hedges if we get a break in the coming weeks. Natural gas picked up 4-5% today and in two days prices are nearly 25 cents off contract lows. We still would not jump long until we get a settlement over $3.80 in November…which could happen next week so stay alert.
The indices picked up just under 2% and have advanced 14% in the last two weeks on very light volume. We’ve completed a 50% Fibonacci retracement and though clients will be absent on further appreciation a 61.8% retracement would lift the S&P an additional 25 points and the Dow approximately 250 points…trade accordingly. Gold will close up $40 on the week and close out today above the 20 day MA for the first time since mid-September. The key next week will be a close above $1692…if we fail look for a trade back to $1600. We favor an upside move and have some clients positioned in call options into 2012. Silver remains range bound but the fact that the 9 day MA held this week is mildly supportive. Most clients have bullish exposure and are using hedges via futures or options to mitigate downside in an attempt to lessen the volatility. We see support in December just under $31 and on a close above $33 we should see $35/ounce within a few sessions…trade accordingly.
The dollar has lost just over 4% in the last two weeks and the momentum has clearly shifted from bullish to bearish. We have a target now at the 61.8% Fibonacci level at 76.30 in December. Our upside objective have been met in the Euro and Aussie but all other crosses have lagged. If long aggressive traders could stay in open positions. As for fresh entries we are scaling into shorts with clients in the Yen with a downside target at 1.2700. Cocoa appreciated 1.6% today but if we do not see a settlement above 2700 next week we would move to the sidelines. Sugar has appreciated 12% in the last three weeks which in our eyes is too much so on signs of an interim top we will be looking for bearish trade entries.
OJ has traded higher 9 out of the last 10 sessions picking up just over 20 cents. Longs have got some premium back but November call option holders will hold into next week looking for a touch more…stay tuned. 30-yr bonds will close on their lows making it three loosing weeks in a row. Clients will be looking for an exit next week on a trade closer to 136’00 in December. Corn and soybeans closed near their highs for the week while wheat traded up today but well off its highs. We still favor buying dips in corn and soybeans expecting further upside. Our first objective has been reached…from here we see March corn at $6.75 and January soybeans at $13.20. Live cattle are approaching their record highs but we still need a break to re-establish longs for new entries. Twp times earlier this year lean hogs failed at these levels…will three times be a charm?
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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