Volatility Persists 2/17/10
We expected volatility this week with still many unanswered questions and China away for the week but this is a bit much. Quite a turnaround just in the last 48 hours! April Crude is back above the 40 day moving average getting back all the previous losses from the previous week. We are tracking June $80/85 call spreads but have yet to make a move for clients. We would like to buy on a day premiums are hit, i.e. a $2 plus down move. We will be looking to be a buyer for clients in the next week as buying in mid-February and holding until mid-May has been profitable 20/26 years. Past performance is not indicative of future results. We advised clients to exit their RBOB spreads at a 10% net profit today as we do not want to have exposure for clients in Crude and RBOB as they should move in the same direction and we do not wish to have to large of an allocation in energies. As for upside resistance in the S&P we’re suggesting selling futures at 1111 and then 1125 if given the opportunity. Sugar failed to close above the 20 day moving average at 27.30 as indicated yesterday and instead got hit for 4.5% today closing below the 50 day moving average. We would hold off on futures entries but will be trying to buy May 25/30 1:2 call spreads tomorrow for 70 points O/B ($784). Treasuries were lower pulling prices back near support levels; clients have no exposure though the trend remains down. We want to be short but only from higher levels. Continue to scale into shorts in long dated Euro-dollars; we like the March 2011 contracts. With the exception of oats all the Ag commodities were lower; corn by 2%, soybeans by 1.5% and wheat by 2%. No damage was done to the charts and we still like long exposure in corn. A move higher in oats could be a precursor of what to come elsewhere. Live cattle were sideways; as previously stated short term we are thinking lower and after a 4-6% correction a resumption of the up trend that has been in place since the first week of December. Gold did close above the 50 day moving average today but I would’ve liked to see more follow through. We like being lightly long now but still cannot rule a trade back under $1100 before the weekend. Our favorite play is August $1150/1250 call spreads. Silver experienced some back and fill today dragging prices back below the 200 day moving average. We have staggered buy stops below the current market for clients ranging from $14.75-$15.20 on the May futures. As for options we suggest July outrights or $2 call spreads. The US dollar is manic; down 1% yesterday and up 1% today? Clients legged out of their Euro-Yen today taking a profit in the yen futures today around 1.10. They now are currently long Euro expecting a trade back to 1.3850/1.3900.
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, china, commodity, corn, crude oil, futures, gold, MB Wealth, options, RBOB, silver, soybeans, sugar, volatility, wheat
