You cannot have your cake and eat it too! Either circumstances in the economy are getting better and we need to start looking for an exit door, or we are still in for a sh-t storm and then no action is necessary! If the Fed sees the economy improving, then why leave IR at an “excessively low rate for an extended period”? Inflation subdued by what measures? Pass me what Ben and the gang are smoking.
Crude gained by 2.5% today, ideally this is a one-day wonder but tomorrow will tell. Talking to some big energy traders today, they expect a range from $76-82. We will continue to play options for clients on rallies, thinking that we will head back to the lower end of that range. It sounds like a broken record but we like scaling into longs in nat gas at these low extremes. What will be the catalyst, one client asked today to turn around prices? I do not know, but this short trade feels too crowded!
Indices were sideways to up on most of the session and are still trying to digest the Fed's non-action to decide where from here. I’ve thrown in the towel trying to predict a top, but some of the cycle analysis that we’ve read of late courtesy of some of our clients predicts that going into April it could get ugly. Let Treasuries rally 1 1/2-3 handles before selling! We will have an interest in 30-yr bonds closer to 120′00 and above 118′00 in 10-yr notes.
Sugar made fresh lows, futures traders should have been stopped at a loss when we broke last week's levels. We are holding off on all new entries until this market bottoms. On a rally if we get one in the coming weeks we will be looking to cut losses on call options for clients.
It's green across the screen in agriculture today with corn up by 1.0%, and wheat and soybeans by 1.60%. Corn is a buy; in options we like July, and in futures, December. We still think there is a possibility to see a trade close to 38.00 in May soybean oil to exit for clients; we will give it till the end of this week.
Metals caught fire today, likely because of the pressure on the dollar and strength in outside markets. April gold, May silver and May copper all gained virtually 2% each. We do not trust the upside and the only way we see it following through is we get a hefty break in the dollar... stay tuned. That being said, the dollar index broke the two previous days' lows, and the trend line that had held since the first week of December. The Euro and Pound should benefit the most as they have been hit the hardest. The Euro could make a stab at 1.3950/1.40 and the Pound at 1.5500; next significant resistance levels.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.