This does not feel like Spring Break to me as I need to be glued to the screens. The good news being that since I live in Fort Lauderdale, it may feel like Spring Break at the beaches this weekend.
A small victory today: we had a bearish engulfing candle in oil. As of this post prices are $2 off their intra-day highs. We were lucky enough to buy back our bottom legs this morning when oil was positive, and now clients own May $75 puts and should be able to profit on the trade as prices make their way closer to $77/76. $5 put spreads that were bought within the last few session stay put looking for lower trade.
It has been a long five weeks as natural gas lost another 15 cents this week. We are lonely in this trade as most people doubt we can turn around anytime soon, but clients remain long via futures and options as they believe, as do I, that we will be back over $5 within a month.
Clients still hold June puts in the ES and SP but as prices closed at a fresh high yesterday we advised them to cut losses on futures. We still think we could get a nasty correction, but until the markets tops there is no reason to fight the tape.
Next week will be key in sugar to see if the almost 35% correction was enough to attract fresh buying. We think it was, and expect a grind higher from here. Cotton rallied about 2% today; it was too good to be true down all five sessions this week. Clients are short, still looking for 75/76 cents in May.
Corn has been down for the last seven sessions but it has only dropped 20 cents in that time frame. We like being long via options and futures, and have advised clients to lift all their short hedges. I would favor July options to May and if interested in futures, we would trade the new crop December futures. May soybean oil is down 3.5% in the last 2 sessions; another 1-2% and we would look to book profits on shorts. Stay out of cattle’s path; April made a new high today, lifting prices to levels not seen since the fall of 2008. We feel we are close to a top, but like stocks, there is no reason to jump in front of a freight train. There will be a time and place to get short and we will advise when, but not yet.
April gold traded below $1100 but closed just above that level. We think more down side is likely and currently own NO gold for clients. Likewise with silver we feel we could get some pressure short term. Assuming the recent H/L, a 38.2% Fibonacci retracement is $16.40 and 50% is $16.10. The closer prices are to $15.75, the more aggressive a buyer we would likely be for clients. Copper prices really did not go anywhere but we did close down all five sessions this week. We are thinking if we see another leg down here or overseas, copper could get hit 10-20%.
The dollar closed down, and ended below the 34 day moving average for the first time since mid-January. If the dollar continues lower, look for all the currencies to temporarily gain. We are using the volatility to scalp intra-day for clients in the Pound and Yen. Clients remain short the Loonie via June puts and took some heat today but should be fine in the coming weeks.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.