Is this Rally Real 9/27/11

It is too early to tell if this is a true turnaround but we at minimum view it as a tradable event…time will tell. Crude is $7 off its lows from just yesterday hitting the 9 day MA on its highs today but we’re not out of the woods just yet. Continue to buy dips but do not be a hero  until things stabilize. We like the action but are not 100% convinced the worse is behind us…stay alert. Further upside in the distillates should bolster the bullish case for oil but we need to see more positive action in the coming sessions. Natural gas remains a buy as we continue to tell clients to get a small position and add to the winner once the markets proves us right. Risk to reward at these levels we feel longs in natural gas are one of your best bets. A potential band-aid on the European situation caused a rally in overseas markets that spilled  over to our equity market domestically with the indices gaining for the third consecutive session. On a settlement over the 50 day MA expect  the momentum to increase. Those levels are 1200 in the S&P and 11400 in the Dow. Both levels just out of reach from today’s session highs. I ‘m feeling far better with my most recent buy recommendations in gold and silver with prices higher by 3.6% and 7% respectively  as of this post. Like oil we are not out of the woods but we’re operating under the influence that dips should still be purchased. If December gold can maintain the 100 day MA at $1635 we feel $1700 will be the next level in the coming sessions followed by $1745 the 50 day MA. December silver needs to hold $31/ounce. We are looking for a trade closer to $35 to exit or most recent client  purchases. Those for the long haul could look at March 2012 bull call spreads. Copper is on our radar and if we see a probe south we may initiate longs…stay tuned. At a minimum monitor the action in “Doc Copper” to help navigate outside markets. The dollar traded down 1% today exhibiting classic signs of an overstretched market. On continued selling use the 20 day MA as your first target at 77.15 in December.  The Pound, Loonie and Swiss continue to be buys in our eyes. Our targets are as follows: 1.5815, 1.000 and finally 1.1600. Cocoa has appreciated 4% in the last two sessions and it may be the beginning of the move we’ve been calling for in recent weeks. Our suggestion remains bullish exposure in March contracts. Stand aside and let sugar and coffee work higher before initiating shorts again. Today sugar was higher by nearly 4% and coffee added 2%. Treasuries traded lower as most commodities and indices were higher on the session. Continue  to monitor the flow of money to see if this is a one day event or the start of a new trend. As of this post 10-yr notes have violated their 20 day MA and 30-yr bonds are on that line which has served as a pivot point  for several weeks…trade accordingly. Continue to buy dips in corn and wheat…just do not get too overly bullish because we have a quarterly grain stocks report on Friday and do not rule out games from the USDA playing with  the numbers. If and when live cattle come down to fill the gap from yesterday’s open look to gain bullish exposure in 2012 contracts and exit all remaining shorts in 2011 contracts.

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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