Upbeat numbers out of the US and China contributed to the gains market wide but remember the cure for high prices is higher prices. That being said I do not think the current pick up in commodity prices is sustainable until we get a correction. Trade accordingly. Crude starts the week with a 2% appreciation lifting prices at its highs back to its 40 day MA. After an $8 slide a bounce was overdue but May will need to stay below $106-106.50 or I would exit remaining bearish trades. I suspect we get a new low and Crude is below its 100 day MA in May at $101.80 this week. RBOB and heating oil picked up 2.25-2.5% depending on the month erasing last week's losses. As long as we do not see new contract highs in the distillates a bounce is ok. Today marks the first positive day in natural gas in six sessions with an advance of almost 2%. May got within 7 cents of the $2 mark and I still think we got a shot of seeing a sub $2 trade so in my opinion it is too premature picking a bottom.
Equities are approaching their contract highs as it appears momentum may lift the indices to fresh 2012 highs. I remain a spectator with clients not wanting to be long at these levels. As far as short entries, not until we see a close below the 20 day MA, in the Dow at 13065 and in the S&P at 1392. My bias remains down but until June gold breaks $1700 or $1640 it's a guessing game. I think the direction of the break out above or below those levels would drag or lift gold 3-4% but don't outsmart the market. A trade above $1700 prices would likely wander to $1775 and below $1640 I would have a downside target of $1575. Silver held support at the100 day MA advancing 1.5% today. I would play the break out here as well…a trade below $32/ounce in May or above $33.40 would signal the next leg.
Sugar traders should wait for a bounce to re-establish shorts. Coffee picked up 2% today which is a start but I want to see May closer to $2 before initiating bearish trades. The idea would be to sell into a rally as prices approached the down sloping trend line that has held for the last seven months. Traders in short Treasury trades, whether it is 10-yr notes or 30-yr bonds, should have stop loss orders just above the recent highs. This is a relatively low risk trade based on today's close …less than $700 risk per position. It is still viable that live cattle challenge their June lows and feeder cattle their December lows so I would not be probing longs yet. Traders that still remain in short futures my suggestion would be to sell puts or buy calls in case we get a bounce. This would be you managing your open trade. I see continued strength in the AG sector with another 20-25 cents in corn and wheat before we meet serious resistance and soybeans I see another 50 cents until resistance. Trail stops if long though as we've seen acceleration in recent sessions off last week's USDA report. Today marks the first settlement below 79.00 in the dollar so I would expect more downside in the greenback. After taking a profit on longs in the Yen as of last week I would see if we can see a slight advance and then look to start bearish trades in June…likely closer to 1.2400. Stay tuned for specific trade recommendations.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.