Commodity Correction 5/4/11

This is a correction not an end pure and simple in my humble opinion. Active traders can play the counter trend investors can wait for a better long entry. Crude closed below the 20 day MA today for the first time in two weeks making its way to the 50 day MA which is our next target. In June that level comes in at $106.80. Look for RBOB and heating oil to track lower; June RBOB should see $3.10 and this set back will likely drag heating oil under $3/gallon…trade accordingly. Natural gas lost 2% today and should trade lower in the coming sessions dragging prices in June back towards $4.25. The indices traded lower again today but we lightened up on shorts booking profits as we expected more of a set back all things considered. It is ok to remain short but just lighten the load. Our targets remain the same but we chose to raise some cash for clients. The dollar appears to be basing out and as we’ve said in recent posts this ship seems to be leaning too much one way…expect a dead cat bounce in the greenback. Our suggestions are bearish exposure in the Euro, Pound and Aussie. The Aussie likely established an interim top this week and should track 2-4% lower in the coming weeks. We’ve yet to get clients long lean hogs or live cattle again but both are on our radar so stay tuned. Gold gave up 1.65% today and should establish momentum on a trade below $1500 so pay attention to that level and how the market reacts. Silver lost nearly 8% today and is approaching 20% in the last three sessions…where are all the silver bulls? We’re expecting another $3-5 decline and then we will likely get bullish once again. In recent sessions we’ve played options on both sides of the market to capitalize on the volatility so this is always an option no pun intended for active traders. Can you say correction in coffee?  Yesterday near a 15 year high and today a 4% break. Aggressive clients who acted should be positioned short looking for approximately an additional 3% drop in the coming weeks. New crop corn and soybeans remain buys…our favored play is December 2011 corn. Another painful day for bears in the debt complex but some of our clients who have kept the faith remain in their bearish 10-yr note and Euro-dollar positions and should get some vindication very soon…in my opinion.

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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