A Rising tide lifts all Boats

It appears the lack of fresh bearish news is viewed as a positive as most markets finish in the green today. Crude has yet to take out the $100 level though prices are within spitting distance. We have advised clients to take off any remaining long in heating oil and Crude thinking we are drawing very near a $5-10 correction. Looking at a daily chart over the last year this week we’ve completed a 61.8% Fibonacci retracement. The 50% level comes in at $95 and a 38.2% retracement at $90.50 in the January contract. In the last five days natural gas has dropped 30 cents making new contract lows every session. The bottom is yet to be determined as we expect further downside. Do not rule out a probe of $3.25. Stocks pared overnight losses to close slightly higher just above their 9 day MA’s. We are expecting a break lower so we’ve opted to hold onto our clients ES put options though they are under water. Our targets remain 1185 in the S&P and 11300 in the Dow.
Gold finished slightly higher but were unable to get above the previous highs and until they do we’re operating under the influence prices can move back near $1700/ounce. Silver finished up 1.6% closing above the 40 day MA for the first time since mid-September. Though a positive development we’re still looking for a correction lower. I’m interested in establish longs closer to $30/ounce not at current levels. The dollar traded back up to its recent highs; a trade above 78.50 gets bulls back in the driver’s seat. The Yen and Pound remain our favored short plays with targets of 1.2700 and 1.5500 respectively.
Short term coffee and cotton may work their way higher and if so we are interested in selling at higher levels with clients. March cotton closer to $1.10 and March coffee closer to $2.60. Before adding length to established bearish trades in 2013 Euro-dollars wait for a settlement back under the 20 day MA; in December that level is 99.10. Agriculture prices are starting to stabilize…we could get a bounce in all products from here…back off on new shorts and tighten up stops. Lean hugs have advanced now for the last four days. Those already long should have stops just under the 9 day MA. We still are waiting for a trade closer to $1.21 in February live cattle. We do not think today’s action is the beginning of the move we’ve been looking for…remain on the sidelines.
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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