Oil broke below the support level indicated in recent sessions. This is why we chose to use May options spreads as opposed to futures; again, clients own $7 Bull call spreads. If aggressive traders were long futures they should have got stopped at a loss just below $75. Three days running natural gas has come off 50 cents and is now approaching a level where we are starting to be interested in being long with clients. We’ve yet to make a move but stay alert, as we are getting close to initiating longs with our first leg on futures and perhaps some calls in May or June.
The 100 day moving average held on Indices and we may now get the rally we were looking for to sell. A trade up to 1125/1135 in the ES & SP is a sell in our opinion.
Cocoa is breaking as we felt it would; unfortunately it happened without us getting clients positioned. Prices were down huge early but managed to close just above the 100 day moving average. In March that level is at 3260, it should serve as the pivot point. Thankfully clients took their long sugar calls off yesterday as prices were lower by 3.25% today. For the correction to continue, prices need to penetrate the 20 day moving average; in March at 28.05. If we do get a breakdown the calendar spreads (short March/ Long July) should pan out. OJ was higher by 2.25% today; clients are very close to getting out of the recently purchased May back spreads, as we suggested place gtc profit orders.
The 100 day moving average held in silver but do not get overconfident as in the short run, prices could go either way; we suggest light exposure until the market says it is moving higher. As for gold, the 50 day moving average continues to support, but do not fall in love at these levels! Light long exposure scaling into futures or call spreads is our suggestion.
Agriculture was hit across the board; clients are very close to getting hit on their March shorts in futures to protect against the December futures. See recent posts for clarification. We’ve yet to buy soybeans but are getting close to buying both soybeans and soy meal... stay tuned. Corn may be painful in the immediate future but we are building long positions for clients and will be a buyer for the next 2/3 months, thinking prices will be much higher by late summer into the fall.
SELL EURO-DOLLARS! The Fed did nothing, but prices reversed and swung 10-15 ticks. We think being short at these prices may be the best risk/reward trade in the entire commodity sector. Continue to sell rallies in the British pound. Clients that have large long exposure in commodities were advised to buy a small put position in the Aussie dollar ahead of the Fed for protection.
We believe live cattle prices have come down enough to start scaling back into longs; we suggest June futures with option protection and will have some ideas on August to follow in the coming sessions.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.