Call it a correction I call it volatility. The talking heads report the news not make it and trading is about being there before the move. Nothing goes up in a straight line and I think traders need to be nimble and be able to trade both sides of the market more than ever. Crude lost 5% giving back the previous two days activity. We remain long with our options for most clients and suggested paring the size of the trade down in futures in Crude and the distillates or moving to the sidelines. Stocks were hit today but we would like to see a settlement below the trend line and 50 day MA which both come in at around the same level; 1335 in the S&P and 12530 in the Dow. Bullish engulfing candle in the dollar today lifts the index above the 50 day MA for the first time in four months.
On continued strength in the dollar look to fade rallies in the Euro, Pound , Aussie and Swissie. We’ve yet to act on the Yen but we started to price out bearish options strategies for clients today…stay tuned. We advised clients to move to the sidelines in livestock; both in lean hogs and live cattle today at about the same level they established longs. Let the dust settle and we will likely buy in the coming sessions.
Silver failed to get above the 50 day MA and looks poised to test the 100 day MA overnight. Play the direction of the break out above $39/ounce or below $34.50. We think a $2.50-4.00 trading range on a daily basis may become commonplace so be cognizant if trading this metal as it is the Wild West trading silver currently. As gold lost momentum in early dealings we advised clients to exit their longs booking a smaller than anticipated profit but still a “W.” On further dollar appreciation we would expect June gold to trade back near $1450/1460 ounce.
Sugar gave back all its gains from yesterday and some but clients remain long thinking this is one of the best value plays in commodities currently. Coffee lost 3.3% today breaking a trend line that has held since mid-November. We expect further weakness and will be shopping bearish trades in the coming sessions…stay tuned. A bearish USDA report had grain bulls on their heels with corn losing 4.25%, wheat over 5% and soybeans marginally lower. We continue to suggest buying dips in new crop corn and soybeans …adding once the market proves you right. Our target in November 2011 soybeans is $15.50/16 and $7.50 in December 2011 corn. Euro-dollars and 10-yr notes lost our clients money today in shorts but we will stay the course for now. I like that Jim Rogers is joining the party and getting short Treasuries…nice to be in good company.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.