Mixed Signals 3/29/11

Day to day I sway from bullish to bearish as I continue to get mixed signals, that being said I see four options…step to the sidelines, keep your trading size small, use a combination of futures and options and do not trade only one side of the market. Crude oil is back above the 20 day MA…we could see a trade $3-4 higher or lower and neither scenario would surprise…the safer bet may be waiting until we get more direction. Natural gas gave up 4.25% today in day two of a correction that should drag May back near $4…trade accordingly. The indices posted a two week high today and without a curve ball in the coming sessions should challenge the highs from mid-February. Clients are on the sidelines but forced into the market we would be long but let me be clear at the moment clients have no exposure. We’re still anticipating a US dollar rally and have aaadvised clients bearish exposure in the Euro, Pound and Yen. A fresh record high in live cattle and clients have no exposure…a disappointment as we’ve left a few shekels on the table here. Buy dips that hold the 20 day MA…our targets remain $1.20 in June and $1.30 in December…trade accordingly. Gold and silver were slightly lower down for the fourth consecutive session in both metals on a closing basis. We expect a trade back to $34/ounce in May silver and $1375/ounce  in June gold in the coming weeks. July cocoa gave up nearly 6% today and 17% in recent weeks…shorts have cleaned up but it is now time to be long in our opinion. Today we aadvised aggressive clients to start scaling into longs with a target of 3300 in the futures. The play could be either futures or buying out of the money call options with an exit target of 3300 in the coming weeks. Continue to fade rallies in cotton and coffee as we think a further 10% depreciation is in the cards. Today’s action may have been short covering but needless to say we suggest scaling into longs in new crop corn and soybeans ahead of Thursday’s planting intentions report. Clients were advised to lighten up on their Euro-dollar positions to raise cash and be ready to trade Ag futures and options in the next few days. We will look to sell the next rally in Euro-dollars in the coming weeks.

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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