Dollar just a Bounce 5/16/11

The craze has been a dollar reversal but we feel that is just talk and we are moving south again from here. Crude oil posted a lower low and lower and high as the momentum shifted down in today’s session. We could see a third attempt to break $96/barrel in the July contract…stay tuned. We recommend cutting losses on longs and moving to the sidelines for now. The big mover in this complex today was gasoline with prices losing nearly 5%. Heating oil and Crude could be dragged lower on further weakness in RBOB so pay attention to outside markets. Natural gas gained for the third consecutive session; aggressive traders could be lightly long with a target of $4.55/4.60 in July. Our favored play is August bull call spreads to play the potential appreciation. As of this post the indices have finally broken the 50 day MA’s; if we settle below those levels; in the S&P at 1338 and in the Dow 12560 look for further deterioration. We are not involved but if we were our targets would be 1300 and 12180 respectively in June futures. The dollar index is running into stiff resistance at 76.00 and being we are oversold and every analyst is calling for a stronger dollar we would expect prices to roll over in the coming days…this is the contrarian in me. That being said aggressive traders can buy the European currencies with tight stops; we will likely wait till mid week before taking any action for our clients…stay tuned. Wait on the sidelines for a lower long entry in lean hogs and we will ride our small live cattle position lower temporarily as we feel we are close to a value zone. Those in December call spreads may be advised to buy heir top leg back in coming sessions…stay tuned. Inside day in gold but the trend line is still acting as stiff support…we remain neutral in gold. Silver gave up nearly 4% today closing under the 100 day MA. We will need to see some buy side interest very soon or the next stop may be the 200 day MA; in July at $29/ounce. Our clients have lightly started to gain long exposure so obviously we’re looking for this level to hold. In the softs complex we are adding lumber to our buy list as to join sugar. Like sugar lumber prices have been hit hard down over 30% ytd. An additional disclaimer about lumber is a lack of volume and liquidity so do not expect the best fills and this would be more of a longer term play. Coffee remains a sale as prices have lost 15% in the last two weeks and this could just be the beginning…in our opinion. Continue to buy new crop corn and soybean contracts as we feel prices will need to trade substantially higher to entice farmers to allocate more acreage. We would advise cutting losses on Treasury shorts and we will likely be getting out of options on the next set back for clients at a loss.

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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