Don’t forget the Fed 1/25/11

In case you were not aware the FOMC is meeting today and tomorrow so stay alert as even inaction can be a market mover. We’ve advised aggressive clients to scale into longs in Crude futures and to gain bullish options exposure; today some clients bought May $95/100 bull call spreads. The 100 day MA held today just above $86 and the trend line comes in just below that level.  Natural gas has lost 7% in the last two sessions and we feel there is more downside to come…stand aside for now. My gut tells me the indices are over due for a set back but the jury is still out. My suggestion is play a break out above 1300 or below 1275 as that should determine the next leg higher or lower. On a settlement below the 20 day MA we have an interest in getting clients short the S&P. Continue to sell rallies in the Loonie and Cable; the Pound is down 1% today as of this post. Aggressive traders could also start scaling into shorts in the Euro. 11 positive days in a row…I smell a correction back to 1.3400 in the coming weeks on a dead cat bounce in the dollar. In the coming sessions on a trade lower in live cattle lets see if the trend line supports; about 110.50 in April. Given the opportunity we suggest being a buyer closer to 108/109. It appears that the selling is slowing in gold and we should be close to turning higher. Trail stops down on shorts as we feel a settlement back over $1350 this week or next should shift the momentum back to the bulls. Silver was lower by another 1.8% today as longs hold on. Our timing was less than perfect but being we suggested only a small allocation clients are not fretting just yet. When prices turn we will be looking to build on their long position. We maintain that a further correction is coming in corn and soybeans; today corn lost 1.72% and soybeans were lower by 2.15%. Aggressive traders could lightly get long 30-yr bonds and/or 10-yr notes with stops below the recent lows. We did not act for clients but see this as a viable trade. Clients were advised to book profits on their May cocoa longs today. We were a bit tardy but were able to get some clients short July coffee today via put options. My suggestion is to gain bearish exposure and sit for a few weeks as we feel a 7-10% correction is coming…trade accordingly.

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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