Pedal to the Floor 1/5/10

Bulls remain in the driver’s seat in most commodities but do not get too overzealous as nothing moves in a straight line. Crude oil closed back above the 20 day MA; from here a close over $92 signals higher ground a close below $88 in February should signal lower trade. My bias remains to the downside but view a $3-5 set back as a buying opportunity. Natural gas lost approximately 4% today, an additional 5% we would be interested in exploring longs once again for clients. As the indices made new highs in early dealings we advised recent short entries to exit their March ES put spreads. Those traders that have been in the trade for several weeks still remain in the trade carrying a loss and will look to exit at a loss on the ensuing sell off. The US dollar is higher by 1% today with all crosses except the Loonie losing ground. Wouldn’t you know that is where our clients are positioned. We still are anticipating a trade lower to .9800/.9850 in the coming sessions. Our bearish bias exists in the Swissie and Yen as well with the chart damage done today. Being the 20 day MA held again today we advised clients to exit their bearish plays in live cattle today. The February contract at a loss and the April contracts at a profit. Our advice would be to cover shorts in lean hogs as well being the 20 day MA held; our clients had no exposure. Gold closed below the 50 day MA and should have some more work on the downside; the 100 day MA is viewed as the next significant support at $1335 in the February contract. Silver is a bit more confusing as the settlement today will be at the trend line with prices closing nearly 70 cents off their lows. I guess we will have to wait another day but I feel we should see a probe of $27-28 before seeing new highs…only my opinion. If Treasuries make a new low we would likely get a sell signal in 30-yr bonds and 10-yr notes…I guess better late than never. Continue to sell rallies in cotton and buy dips in cocoa but be willing to take some heat or look elsewhere. Aggressive traders could gain bearish exposure in coffee; expect some trade ideas in the coming sessions. The 20 day MA held in corn today but we’re not convinced there has been enough of a correction. As opposed to getting outright long we’ve advised clients wishing to gain exposure to buy December ’11 and sell March ’11.

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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