Market Reaction 1/12/11

Investors traders alike need to recognize it is not always about the number in the report but rather the markets reaction. Crude continues to move higher advancing .070% as of this post though I would have expected more upside today with the weakness in the dollar. Move support now up to the 20 day MA at $90.10 in February. On a new contract high trade above $92.60 our suggestion is move stops up to $91.50. On a set back we will be advising clients to buy futures and sell out of the money calls likely looking at May or June contracts. Natural gas has gained for the last four sessions. As long as $4.30 holds in February we’re suggesting long exposure. We like the idea of 50 cent call spreads in April contracts. No more short entries in the indices as all our clients bear put spreads are now under water. On a trade back near the 20 day MA if given the opportunity we will likely be cutting their losses. The dollar is back below the 20 day MA having lost 1.7% in the last three sessions. We feel an interim top is in and expect a trade back near 78.00 in the coming weeks. Forex traders are advised to buy set backs in the Euro, Pound or Swissie. A trade back to .9900 in the Loonie should get clients close to break-even on their March put options. Fresh contract highs today again for lean hogs and live cattle and we think there is more to come. Buy dips in April contracts expecting 3-5% further appreciation. Two sided trade in metals today; our suggestion remains long (3) silver against (2) short gold; the idea is to make more money in silver than you lose in gold. A bullish USDA report aided in a 3.95% appreciation in corn, 4.25% in soybeans and 1.45% in wheat. We may see some back and fill action in the coming sessions but based on supply and demand constraints we feel both corn and soybeans will need to trade higher to ration demand and to find more acreage. Those long into the report were advised to take partial profits today in their corn and soybeans. In the last four days we think cocoa has moved about 50% of the total move we’re anticipating, that being said we have a target about $150 from the current pricing. Bearish engulfing candle in sugar today but we’ve yet to commit any client capital…stay tuned. Coffee closed higher by 2.51% today briefly trading to new contract highs but we think prices are too rich at these levels so stand aside.

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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