Energies caught fire today and finally started to trade the way we’ve been forecasting in recent sessions. Crude closed 2.5% higher on the day; if March can close above $75/barrel in the next few days, that should confirm an interim bottom. Clients are positioned in May call spreads to take advantage. Natural gas was a gainer by 5.5%; as we published in our commentary this morning, we’re suggesting light long exposure in March futures with stops below last week's lows and April 75 cent call spreads. Weather permitting we could get a test of $6 next week.
We would wait for more of a bounce and sell Indices; ideally the ES & SP allows a sale between 1105/1115 area in the March contract. Treasuries remain range bound; we suggest the sidelines here for now. Continue to scale into shorts in Euro-dollars in 2011 contracts. The dollar could be making an interim top. A number of Central banks meet on rates this week so stay alert. At the moment we have no new suggestions but as the week progresses we will... stay tuned.
OJ prices regained their footing today higher by 1 penny; clients remain long via May back ratio spreads. Another $50-75 lower in cocoa we suggest taking profits on shorts. If in fact sugar can correct, the calendar spreads (long July/short March) should allow traders who stuck with this trade to book a profit; the spread picked up $571.10/per today.
Clients continue to accumulate May and July calls in corn and December futures ahead of the upcoming USDA reports. Still looking for lower pricing in live cattle to re-establish longs for clients. Now that the 20 day moving average was busted in lean hogs, we would refrain from trying to get long; next support is seen at 64.80 and then 62.60 in the April contract.
Silver is back above the 100 day moving average gaining 3% on the day. We will be looking to add to clients' longs on more upside. April gold is back above the 50 day moving average, and similarly if the recent lows hold we would suggest adding to your longs.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.