Very little action in Crude today with prices closing slightly lower for the seventh consecutive day. As we suggested yesterday, we advised clients to buy March $5 call spreads expecting a trade back to $75 in the next 2/3 weeks. Natural gas exploded today with a surprise draw on the weekly AGA inventory report. On 2 occasions just this week prices moved in excess of 9% in 1 day. If you do not like volatility then look elsewhere. We will not be looking at natural gas until 2010.
The only excitement we see in the softs complex was a breakout in sugar. Prices in March were higher by 5% today and finally closed above the trend line. Clients are positioned long via futures and options. Equities remained sideways; we suggest playing the breakout and currently have no bias. Say it is not so a positive day in metals. Yes indeed gold gained $10 and silver 20 cents. Clients currently own light longs in silver, we would be convinced to start scaling into longs in gold if $1100 was not penetrated in the next few sessions.
No surprises in this morning's USDA report. Perhaps the bigger catalyst will be the COLD weather in the Mid-west. This could be the beginning of corn’s next leg up; if so we would expect a trade up to $4.25 and then potentially $4.50. Clients are long March and May in options and futures. Results in today’s auction were disappointing. Clients are long 30-yr bonds and short 10-yr notes. To date this trade has moved against clients but we still like the trade. We see good support in March 30-yr bonds near 117′00 and in the coming weeks we expect prices to find their way to 122′00/123′00.
Live cattle…clients are long and wrong at this time but remember that is how past trades started in natural gas and corn and we all know how those turned out…keep the faith. When an interim bottom is established we will be adding to the position for clients. Nothing notable in currencies 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.