A Tipping Point 1/19/11

Have stocks and commodities traded high enough to take some money off the table? A close below the 50 day MA today likely means lower ground; that level is $91.55 in March. No claim to a crystal ball but my assumption is we will see a trade to $88/89 in the coming weeks. An upside break out in natural gas today means longs could re-enter the markets with stops below the recent lows. We should be issuing some option trade recommendations in the coming sessions. Today the indices lost 1-3% but until we break the 20 day MA’s the bulls retain control. We suggested for some of the further out of the money Marches put spread holders to buy back their bottom legs today. A close below 1265 in the S&P leads me to believe 1225 could be in play…trade accordingly. Our favored play in the currency sector remains bearish exposure in the Loonie and Cable. Our targets are .9850 and 1.5700 respectively. Traders should be trading the March contracts either futures or options; today we suggested purchasing .9900 puts in the CAD. We are operating under the influence that we will get an additional 2-3% retracement  in lean hogs and live cattle in the short run. Gold ands silver made new highs but neither metal was able to hold onto their gains. We suspect a probe higher but would suggest trailing stops being today’s action was far from strong. March silver will need to overtake $29.75 and February gold $1385 very soon too see higher ground. If this does not happen almost immediately we will get a correction first…only my opinion. I have said this many times in the past follow oats and the other grains will follow…a near 3% loser today. Corn was lower by 2.77% while soybeans were marginally lower. As we voiced yesterday expect a correction in the short run in both these markets. Those willing to stay with a trade for several weeks could consider buying December 11′ corn and selling March 11′. Cocoa advanced to a six week high and on a trade above 3150 we could be off to the races…remain long. Coffee closed below the 20 day MA for the first time in 2011, our suggestion is to sell rallies. We’ve started to track options for the month of May…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.

Read more at MB Wealth