Tipping Point 4/28/11

We feel that some commodity prices are getting overextended and very close to their tipping pint. Far from an ultimate top but ready for a healthy correction.Crude traded to its highest level in two weeks but could not manage a positive close. We favor a trade lower but would be quick to let the trade go at a loss to clients on a settlement above $114.  We’re eager to get some bearish exposure in the distillates as we feel a violent correction could occur but we must first see signs of a top which has yet to happen. Some clients were stopped out of their natural gas at loss today on the AGA report when new highs were made. Seven days in a row the stock market has traded positive…I disagree but play the trend until we see a reversal which in my opinion is inevitable. The dollar route continued today with an additional 0.55% loss. In early dealings we used the rally in the Cable to start gaining bearish exposure; our target is 1.6350 in June. Inside day in live cattle…we’re still targeting the 20 day MA’s and would remain long looking for more upside. Gold is nearing $1550/ounce as the 9 day MA continues to support pricing. Silver closed higher by just over 5% but intra-day was higher by nearly 8%. $50/once may be in the cards but I still think we could see a 15-20% so be careful. Cocoa traded higher by 3.5% today…close enough to reach our objective and take off clients longs as we’ve moved nearly 9% in the last three sessions. Sugar broke the 200 day MA falling 2% today. We will stay the course with longs for now but closely monitor the trade as to not let this one get away. Some clients are under water on their July call options. The screen was all red in agriculture today with corn down nearly 4%, soybeans 2% and wheat 4.5%.  Start taking profits on you shorts and look for a reversal /buy recommendation in corn and maybe soybeans in the days to come. Clients took a bit of heat today but remain short Euro-dollars and 10-yr notes as these overbought levels should not hold for long.

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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