The Fed is the 800 lb. Donkey 12/15/9
A hush came over the commodity market until FOMC decision. The streak has ended at 9 days with Crude pushing higher today by just less than 2%. We are fairly confident that an interim bottom was established yesterday; $68.59 in the January contract. We have clients long via March $5 call spreads expecting a $5-7 advance in the coming weeks. Natural gas has experienced a reversal of fortune and as opposed to a sell rallies market it has become a buy dips market. We will wait till 2010 to look for opportunities as we have no exposure with clients and are not comfortable in natural gas when we are away. The 25% advance in less than 2 weeks may be too much…be cautious with longs. Sugar may set back temporarily as it experienced a violent reversal today. Trail stops on futures, clients were advised to exit their March options but we advised to hold May option exposure. We expect more upside after the shakeout. Sell rallies in cocoa, we think a trade 7-10% lower is in order. Continue to play the break out in equities. We do expect a 10% correction at some juncture but we’re unwilling to place a wager for clients at this time. If recent lows in metals hold we like being long; March silver at $16.90 and February gold at $1110. A potential triple bottom in gold close to that level which could act as solid support is prices started the next leg up. Do not over commit capital…scale into longs. Corn is having trouble breaking the 20 day moving average to the upside. On that expect $4.25 and the $4.50 in March BUT if we start to roll over be willing to give back 30 cents in the futures, If unwilling tighten stops or start to look for an exit. Little change in the NOB spread today, hold the position… we think we’ve seen the worst. We continue to advise clients to scale in to short exposure in long dated Euro-dollars via futures and options. Live cattle are convincingly above the 20 day moving average and closed above the down trend line form early November. We have clients long February expecting more upside. The brutal cold weather should support a further advance. On a trade back near 88 cents we would start looking for an exit scaling out of the trade for clients. US Dollar up ahead of tomorrows FOMC decision. A clear break out in the Greenback but without confirmation on higher rates it could be short lived. Continue to sell rallies in the Cable and Euro-currency. The yen longs we hinted at are too aggressive; we suggesting taking no action.
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: bradbard, british pound, commodity, corn, crude oil, euro-currency, euro-dollar, federal reserve, FOMC, futures, gold, natural gas, options, silver, treasuries, yield curve
