Do not Ignore the Greenback 5/12/11

The dollar has  appreciated 4% in the last week but has the easy money been made on longs? Crude oil should to close about 0.70% higher in today’s session but we would like to see  a settlement back over the 100 day MA before thinking this correction has run its course. Aggressive traders are buying retracements as we think a $5 run higher is feasible in the coming weeks. Hedgers are using the recent set back in the distillates to leg back into their fall hedges…wade back in though as a 15 cent move either way would not shock me. A trade lower failed but I think it is still premature to be bullish natural gas…stay tuned. For the second day the indices failed to penetrate the 50 day MA…we advised clients who were short to move to the sidelines at a slight profit to re-evaluate…stay tuned. The dollar once again  traded above the 50 day MA but failed to hold onto those gains. At this point we think the easy money on longs has been made and we expect sloppy two sided action and would have no fresh currency exposure until next week. We remain on the sidelines in livestock with most clients but based on the chart formation forced into the market we would rather be long than short. Next week we will likely be buyers of  July lean hogs and December live cattle …stay tuned. Gold held the same support trend line that held last week and managed a marginal gain as we remain neutral at the moment. Silver touched a trend line that has been in place since August of 2010. We will need to re take the 100 day MA at $34.50 in July futures into the weekend to feel that the near 35% correction is enough. We have advised clients to start wading back into longs via future, bull call spreads and selling puts under the market. This is not a trade for everyone as the recent daily range is approaching $15-20,000 per futures contract. Cotton traded down the daily limit today…if and when we get a rally we will likely be sellers for aggressive clients. Coffee remains on our sell list even as prices are approaching over sold levels. Sugar bounced nearly 2% today…continue to buy dips in July and October contracts. Hold off on any wheat purchases but continue to buy new crop corn and soybeans,. We advised clients to offset their soybean meal at a scratch as to concentrate on their corn and soybean trades. You know the story in the debt complex as clients are holding onto losing trades in 10-yr notes and Euro-dollars looking for prices to roll over…nothing has changed in  our view.

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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