Trading Your Plan

Over the years I’ve learned that when markets are quiet it is easy to fall asleep at the wheel and not abide to your plan but avoid those pitfalls to increase the likelihood for success. Crude bounced off support and closed back above the 9 day MA above $101/barrel. As long as $100 holds prices should work higher. I have advised the sidelines to clients until we get a clearer picture. Natural gas remained in its 15 cent trading range as prices tread water today finishing slightly lower. A settlement above the 9 day MA is needed for any hope of a recovery. Equities finished flat as the 9 day MA continues to act as the pivot point. Being prices are oversold do not rule out a correction back to the 20 day MA…which would be roughly 30 points lower in the S&P and 240 in the Dow.
February gold is having trouble getting above $1635, the same level that acted as resistance in recent weeks. I expect this to be temporary and have a target of $1660 plus in the coming weeks. Silver is likely taking a breath before its next leg higher as well failing to breach $30/ounce in recent sessions. My target in March remains $32. The dollar failed to hold onto early gains closing lower with all other crosses higher on the day. If this serves as an interim top, which is too early to say buying the Euro may be the best play…stay tuned. Commodity currencies still appear to be at lofty levels so on a commodity correction play the Loonie, Kiwi and Aussie from the short side.
Cocoa picked up 7% today as a new leg higher may be under way. We like the risk to reward dynamic buying at these deflated levels especially if the greenback turns south…trade accordingly. Potential crop damage from last week’s cold temp in Florida lifts OJ limit higher today carrying prices near two month highs. Shorts should have been stopped out on the new high at a loss. Wait for a clearer sign in the Treasury market as we could go either way. New entries in bearish Euro-dollar plays can wait for a higher entry as if looks like there is a touch more upside. Continued adverse weather in South America and buyers stepping in ahead of Thursday’s USDA report contributed to the jump in grains today. Corn gained 1.3%, wheat 2.7% and soybeans just over 3%. Clients have no exposure. Live cattle have lost ground eight of the last nine sessions and still appear to have more downside…trade accordingly. My target in February is 119.00. Remain on the sidelines in lean hogs as prices may test the mid-December lows.
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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