Dollar in Driver’s Seat 8/28/9
Am I suggesting getting long the US dollar…NO. However the powers that be may push the dollar higher so I wanted to make you aware of this. The fundamentals do not justify a strengthening dollar and talk of negative interest rates do not make me get bullish but nevertheless be aware if the dollar rallies we may get a commodity pullback. We are still short the Aussie dollar with clients but may need to move to December as the September only has 8 days. This trade is more of a hedge but we feel 8100 is in the cards on a pullback. Numerous people have contacted us questioning on why we would short oil. We would not outright but only against a long in natural gas thinking the ratio may tighten up. Brutal… yes natural gas was down again today. You know where we stand but just to clarify for all the haters. We are committed to be in natural gas thinking prices are way to low! We may lose on the next 2 contract months but when it turns we will be there with clients. Additionally a thing about risk management when I say we are long or short a particular market that does not mean my clients whole portfolio is in that market i.e. natural gas. We may in fact continue to lose in natural gas but the idea is we will try to more than make up those losses with other winners in other sectors. Silver and gold higher, clients remain long silver and unfortunately lightening up on gold yesterday. Caution getting too long if the dollar rallies. Grains could move lower in the short run, we will ride December wheat and corn but will not be buying more until a bottom is more defined. We will be exiting our clients cocoa shorts early next week, need further downside to get value. Sugar was higher by almost 5% today and broke out to a new contract high. We advised clients to lift there hedges at a profit and remain net long. See previous recommendation; long SBH10′ 25 cent call/ short (2) SBH10′ 35 cent calls. We are trying to work out of the October 50 cent lean hog calls at 300 points o/b. Buy the dip in December 09′ and February10′ live cattle. We still like the spreads, October becomes the front month next week.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
Tags: breakout, cocoa, commodity, corn, crude oil, futures, gold, lean hogs, live cattle, natural gas, options, ratio trading, silver, spread trading, sugar, wheat
