Month of Volatility 4/29/11

In my ten year career I can confidently say this is one of the most volatile months I’ve ever experienced in commodities…what will May bring? Crude oil traded above $114 in the June contract but closed below that level so although carrying bearish positions into the weekend is not our favorite play clients remain short looking for prices to roll over. Natural gas finished a at four month high advancing just over 2% today. We are on the sidelines with clients after taking a small hit on shorts getting stopped out yesterday. The indices powered higher again today making it nearly 5% in the last two weeks. I cannot fight the trend but I will not be involved with clients until I can make more sense of the market. The dollar lost ground for the eighth consecutive session trading near three year lows. That resulted in a 3.4% loss but we feel a short squeeze in the greenback is imminent. We like fading rallies in the Aussie and Pound but have for several sessions for what it’s worth. Live Cattle finished higher for the fourth consecutive session but we’ve yet to penetrate the 20 day MA. We’ve advised scaling into longs in either June or December contracts. Gold outperformed silver today for a change gaining over 2% ad trading near $1570/ounce. Look for a blow off top soon as this trade is getting crowded.  Silver finished out the week gaining 0.75% today but looking at the charts we’re having trouble holding onto the recent gains. We advised aggressive clients to sell June $50 calls to play a potential pullback. Take profits on all cotton shorts as we expect a bounce. Aggressive traders can get short coffee at these elevated levels. Our target in the July contract is $2.75. On adverse weather and perhaps funds shifting into agriculture corn, wheat and soybeans are back in buy mode. We are suggesting clients to scale into July, September or December corn. Clients remain short 10-yr notes and Euro-dollars carrying a loss expecting prices to roll over 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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