Commodities continue to outperform…have you made them a part of your portfolio yet? Crude oil will not reach its highest level in 2011 but we will have the highest close and another 1.6% we will make fresh highs. Bulls remain in the driver’s seat for now. Take support up from $98.50 in May to $101. Our suggestion is to keep your size small, trail stops and utilize options as protection against your longs. The lows from the Fall have held in natural gas and until they break we like scaling into longs below $4 thinking we get a 5-8% bounce in the coming weeks. The 20 day MA’s are acting as resistance in the indices and the 50 day should act as support. Our bias remains to the downside…but play the breakout. Those levels are 1318 and 1290 in the S&P and 12150 and 11870 in the Dow.
The US dollar is down nearly 0.50% today trading to fresh 2011 lows. We would hold off on bearish exposure as we think we are close to a dead cat bounce in the greenback. If long other crosses trail stops or lighten up. Tomorrow we will need to see more upside in cattle to stay the course with longs. Fortunately we did trade back over the 20 day MA today; that level is 114.30 in June. Gold is at a record high and silver is fast approaching $35/ounce. On a trade of 1.5-2.0% higher this week in silver we will advise clients to lighten up on their longs. Sugar appreciated 3.8% today rallying near 12% in the last five sessions. Clients remain long but will start lightening up if May trades near 29.50/cents. Clients remain in their soybean spread and it appears the trade has started to work. A new trade recommendation today supported by heavy commercial buying; clients bought July $1 call spreads in CBOT wheat. We will be buying puts and getting short Euro-dollar futures for clients in the coming sessions; likely in March and June 2012 contracts…stay tuned. The NOB spread (short 30-yr bonds/long 10-yr notes) picked up approx. $500 per spread today.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.