It is not always how the report comes out but how the market reacts. Being oil has had trouble getting above $80 on a closing basis in recent sessions and charts are oversold, we decided to get some short exposure for clients today. Intra-day prices were below both the 40 and 50 day moving averages but we did close above both levels. Braver traders than I can be short futures; we prefer to own May $75/70 put spreads for clients. They paid $1350/per today and will be looking to exit at $1900/2000 on a trade near $75.
We have not acted on futures as of yet in natural gas but we think we will before the weekend, so that leaves tomorrow. The path in the immediate future in equities appears to be down; continue to sell rallies as the S&P should make its way to 1050 in the coming weeks.
Clients got another opportunity to buy back their upper leg on their May 25/30 sugar spreads. We advised them to cover 1/2 their position so they are now in 1:1 25/30 call spreads. If the triple bottom holds from this week, we should see a trade north of 26 cents in May futures. Out of nowhere cotton was up 2.5% today to fresh highs. Our clients are positioned short via a 90 call/74 put July fence. We will stay the course, though it could be painful for a few sessions. We maintain that a trade under 75 cents is likely in the next 30 days.
Treasuries are getting closer to where we would be interested in selling, but we’ve yet to make a move for clients. As we said yesterday, we see a trade up to 118′00 before there is any serious resistance.
It was an inside day in corn, but of all the agriculture it was down the least. We maintain our bullishness for clients via options and futures expecting 50/60 cents upside by the end of March. Tighten up stops on longs in soybeans and soy meal as they could re-visit the lows from 2 weeks ago. Clients were advised to book a profit on their long June live cattle and remain short the April. So now they own April puts and are short April futures, anticipating a trade down to 89 cents.
I was very delighted by the action in silver and gold today; albeit a rumor on buying from China the turn around was impressive. April gold closed back above the 50 and 100 day moving averages, and on some followthrough tomorrow we will look to re-establish long futures for clients. Their only open position in gold is August $1150/1250 call spreads that are fighting back after today’s action. A bullish engulfing candle in silver today on good volume should mean that prices are heading north once again. Clients remain long via May and July calls, and like gold, if we get some upside followthrough tomorrow we would be interested in adding to long futures.
We advised clients to lift their long Yen today at a small profit as prices were not able to get thru 1.13. These positions were originally put on as a hedge and we no longer own that position. Clients own a very small position long the Euro via April 140 calls to take advantage of a potential move to 1.38/1.39 into next week.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.