Why Commodities in a Portfolio 4/1/11

This is not an April Fools joke…commodities belong in all portfolios if an investor has some risk aversion just look what’s happening in commodities compared to other asset classes. Crude has its highest close in 2011 to kick off the first trading day in Q2. The momentum should carry prices upwards of $110/barrel but we would prefer to be a buyer from lower levels so unless already in a position we would remain on the sidelines. Natural gas is on our radar but we anticipate a trade back near $4 before we see more upside so look for a dip into next week. Indices were flat today after a muted reaction to the jobs number this morning …we’ve lightly worked aggressive clients back into bear put spreads in June ES contracts. The greenbacks 1% early day rally failed as prices will close flat in the dollar on the week. We remain to feel the best play at current levels is scaling into shorts in the Aussie to play a 3-4 cent correction in the coming weeks. Aggressive clients established bearish futures and options positions in June lean hogs today anticipating a trade back to the 20 day MA in the coming weeks; in June at 100.70. Both gold and silver traded down in today’s session but we’re anticipating much more than the small incremental moves today. We could see $50 lower in gold and $3 lower in silver in my humble opinion. Cocoa rallied 2% today but failed to penetrate the 200 day MA; in July at 3045. We suggest bullish exposure to play a trade back near 3300. Both coffee and cotton gave up 2% today; we continue to suggest bearish exposure in both.  Old crop corn was higher by 6% today coming off limit in late dealings. We do not think the highs are in but would prefer trading new crop from the long side until we get a retracement in old crop contracts. We opted to take profits for clients on their soybeans as we did not get the expected reaction off yesterday’s USDA. We will look to get them long again from lower levels. Treasuries are in no man’s land but our bias is starting to shift from bearish to bullish so stay tuned for fresh trade recommendations.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Read more at MB Wealth