Could it be the start of the correction we’ve been looking for? Crude oil is down just over 2% as of this post. A 38.2% Fibonacci retracement drags prices to $78.50, a 50% retracement to $77 in the February contract. On another down move tomorrow we suggest putting in gtc profit orders on your option exposure and trailing stops on futures. Natural gas was higher after making a new low and failing to follow through. We have not been sucked back in with clients yet, and at the moment still want to see more downside before gaining any exposure. Today’s low in February was $5.35; we would like to see an additional 25 cents lower.
We’ve been fooled before but we think an interim top formed in equities yesterday. Look for follow thru in the coming sessions but this could now be a sell-rallies market. We failed to act on the 1080 ES puts mentioned yesterday for clients but we will be back at the drawing board looking to gain bearish exposure for clients... stay tuned.
The 20 day moving average is acting as support in sugar, if it holds we may start moving north again. Longer term, out until at least May we like being long but we still think in the short run more downside is plausible.
Gold and silver were hit today, likely due to news out of China of investors moving money between asset classes. Remember gold in the last 2 weeks just moved 7% and silver gained over 15% just in the last 1 week. Nothing goes up in a straight line. After a mild correction they should turn higher once again. Clients will be advised to buy a dip in May and July silver. The gold recently purchased was taken off at break-even this morning.
A bearish USDA report had agriculture on its heels with corn down the daily limit, soybeans a loser by over 3% and wheat down by 6%. We will be looking to be buyers in soybeans on a trade below $9.60 in March... stay tuned. All the March puts bought for protection into the report in corn were lifted at a profit today. Clients remain long March calls at a loss and will try to sell on the ensuing rally. As for new entries we want to be bullish longer term but have protection against a move lower in the immediate future. We advised clients who agree to buy December 2010 futures while simultaneously buying March puts at 2:1 ratio.
Hello Treasuries! There seems to be demand at the auction as yields were clipped and prices in Treasuries rose. We expect March 30-yr bonds to trade up to near 118′00. The yen was higher by 1.25% trading back over 110 on its way to our target at 111/112. Clients put in gtc profit orders on their March 1110/114 call spreads.
Live cattle closed strong back above the 20 day moving average. We suggest on a move north to roll out of February longs and move out to forward contracts.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
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