FOMC: No change in rates and no significant changes in the verbiage as expected. There was mention of inflation expectations but excessive and extended remained in their statement. The problem I see with no change in their course is they are headed down the wrong road, the market is giving the Fed too much credit on getting their timing right. I’m not smart enough to know if they move too early or too late but I’m confident they will get it wrong.
As for the markets, the dollar has started its move lower and virtually all commodities benefited. Oil should close back above $80 as we will be looking for long opportunities for clients. Clients are getting hit on their recent purchase of natural gas, prices are down by 3.5% today… stay the course. Equities trade higher but at this moment we have no opinion, it could go either way?
We used today’s setback in sugar to buy March 30 cent calls for clients, expecting a trade back to 26 cents shortly. Mixed results in agriculture… little change in the wheat spread, corn was down by 1.5%. For traders yet to get long use this setback as an entry. Those already in the trade, stay the course. When December trades above $4 we should see new buying emerge.
Gold prints a new record high as $1100/ounce is eyed. Expect a sharp move, we favor a continued acceleration higher. Clients own April $1100/1200 call spreads purchased 2 weeks ago. We’ve yet to move on futures in silver but May options bought for clients yesterday have already gained 40%.
We re-entered NOB spreads for clients today before the FOMC decision; we’re currently down but will hold the trade for now. We are expecting 30-yr bonds to gain on 10-yr notes. Additionally clients shorted June Euro-dollars.
Live cattle is a buy, we have clients long February via futures and options. Furthermore we bought December against April today looking for that spread to come in. The 2.5 cent rally in the dollar index is over as we closed back below the 20 day moving average. Clients are holding March puts in the Euro-currency and are taking on water. Hold at least thru ECB tomorrow.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.