FOMC down…what’s next 12/14/10

The Federal Reserve meeting today was a non-event. Inside day in Crude oil with prices trading slightly lower. Unless we get a surprise in tomorrow’s inventory report we’re still anticipating a 2.5-4.0% reduction in pricing. Natural gas has retreated just over 7% in the last four sessions dragging prices back below the 20 day MA. It appears we could see a probe of $4 but we’ve been fooled before several times in this market. The only exposure we wish to have with clients is a futures spread long February and short April. Aggressive traders could try to pick a top in the indices but you would be bucking the trend. Some of our clients have recently purchased March ES put spreads expecting a 3-5% depreciation in the coming weeks. We would suggest all currency traders that were previously long the Euro, Pound or Swissie to book profits and move to the sidelines or at a minimum tighten up stops if in futures. Nothing notable in livestock; we would like to be long lean hogs and live cattle with clients but would prefer a long entry from lower levels…stay tuned. Two sided trade in metals today with palladium and platinum higher, copper unchanged and gold and silver slightly lower. As far as our silver traders we advised to exit their March $25 puts at a slight profit and they know are short March $28 puts. On a trade higher we will look to offset the put and in case of a break lower we placed sell stops under todays low. In my opinion the next few days action will be largely dependent on outside markets, a move $1-2 higher or lower would not surprise me. We have lightened up significantly on client’s longs in corn thinking we are close to an interim top. A new trade idea today was to establish bearish exposure in March CBOT wheat. We’re anticipating a 25-40 cent break from today’s close. Cocoa held the 50 day MA today advancing 1.75%. If we see an additional 2-3% move clients will be looking for an exit door on their longs. Sugar gained nearly 1% today on a new high tomorrow clients should be out of their March call options…stay tuned. Without any freeze damage in the next few evenings in Florida we may opt to fade rallies or buys puts in January or March OJ…stay tuned.

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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