Downward momentum is gaining as Crude has lost 2.9% in the last 2 sessions. We are expecting this move to drag prices in May to $76/77. As we voiced in our commentary this morning, exit ALL longs in distillates until this correction runs its course, which should pressure heating oil and RBOB 15-20 cents. Natural gas is still searching for a bottom but we like buying at these levels. We advised new entries to scale into May futures, and we still like 50 cent call spreads for June, thinking a trade back above $5 will play out in the next 3-5 weeks. We’ve been fooled before, as most followers know, but the indices are looking heavy. We’ve yet to redeploy money short futures on a position trade but if the Fed meeting leads to selling we will most likely get short once again with clients.
Some clients still hold their June ES and SP puts and are down, but we are confident that these positions will be profitable. We suggest waiting for more upside in Treasuries to be a seller… maybe the Fed will aid in that.
Sugar was off by just over 1% but we are operating under the influence that the lows last week will hold. The intra-day sell off in OJ was nice but not enough to get us interested in longs. We feel May needs to trade closer to $1.30 to be a buyer for clients. We expect cotton prices to trade lower but we suggest waiting for a close below the 20 day MA at 80.35 in May for confirmation.
We advised clients to add to their July call options and longs in December futures in corn today. May soybean oil lost an additional 2% today; clients will look to exit tomorrow or the next day on a move closer to 38.00. We suggest waiting for an interim top before jumping in front of the freight train we call live cattle; prices made new highs again today. Gold and silver were marginally higher but “Doctor Copper” was off almost 2%. On a settlement below $3.29 (today’s low) look for an additional 10-15 cents.
Monitor the action in the dollar to help trading the other currencies. The line in the sand is the trend line at 80.00 on the June contract.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.