Having a trading plan and ignoring the wild swings is vital in this environment. A doji star on the daily candlestick chart tells me that we may have hit an interim top in crude yesterday. The low today in the April contract was within 6 cents of the 40 day moving; for now that level supports. We still think a trade down to the 200 day moving average is in the cards; in April that level comes in at $75.50. April natural gas traded to its lowest level since December 4th. On December 3rd this contract bottomed at $4.775 and within 30 days rallied 26%, is history about to repeat itself? We have not bought futures for clients yet but we expect to be a buyer in the next 24/48 hours in May and June. As for options, we still like the June $5/5.50 call spreads.
Equities were hit today, if the 100 day moving averages give way, we should see more selling pressure. We continue to position our clients short the ES and S&P expecting a trade to 1000 by Memorial Day. We wanted to sell Treasuries from higher levels and the market is delivering. We see upside resistance in June 30-year bonds at 117′16 followed by 118′00.
May sugar closed below the 100 day moving average for the first time in 10 weeks. We are not suggesting long futures until we get a turnaround, which should be close. As for the May 25/30 1:2 ratio spread, on further weakness we may buy back the 30 cent leg... stay tuned.
We moved the coffee order from 300 to 220 and cut losses in the May $135/145 call spreads today for clients; a loss of $244/per.
Agriculture gave back some of its gains from yesterday but as a whole there was no damage done to charts. We continue to like long exposure in corn and soy meal and soybeans for the more aggressive trader. Live cattle started to roll over today; clients are positioned short in April puts and in a calendar spread long June and short April. As previously stated, we are looking for a trade back to 89.00 in April futures which should get both of these trades profitable.
April gold traded below $1100 today but as of this post is a couple dollars above that level. On a breach of that level on a closing basis expect 1165/1170 to come into play. We suggest the sidelines on futures and would be a buyer of August options on a further dip. The silver chart is uglier with prices losing almost 2.50% today. The trend line that has been in place for the last 2 weeks held, but we did close below the 200 day MA. With so much seasonal weakness unless the dollar comes off I would scale down your longs as a move back to $14.65 is not out of the question. It is OK to be in cash if you are unsure! We left the Euro longs today at a loss for clients; they lost between 2-2.50 cents ($2500- $3125) on their Euro longs but we were able to offset about half that loss on short Yen and short Swiss Francs. As for currency exposure, clients only hold June Yen call spreads, which should work out well if futures make their way back to 1.1300.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.