We're at the fork in the road in a number of markets. In the next few sessions we will find out who wins the BULLS or BEARS. On a break below the double bottom in December Crude futures at $79.85 look for a test of the 50 day MA at $78.80 followed by a trade down to $77. Our aggressive clients were advised to have a small allocation short December futures or January put spreads. Reminder for every $1 move in Crude futures one should see a 3-4 cent move in the distillates in the same direction as a rule of thumb. The losses in natural gas have been painful thankful most clients only have a small position. Being prices are approaching the cost of production we should see prices stabilize from here but we've made a decision not to purchase any clients that are not already involved until we see evidence of a true bottom. As of this post a failed rally in the indices. Aggressive clients are fading rallies in ES futures while others are still holding November and December put spreads. New entries are advised to buy just out of the money December ES put spreads. With the Pound lower and dollar higher it was odd to see cocoa up on the day. We expect this rally to fizzle into next week and remain short via puts with some clients expecting a trade closer to 2600. Wait for further evidence of an interim top to establish bearish positions in cotton and sugar. Most likely we will have some trade recommendations next week. Coffee closed above $2/lb. today for the first time in 15 plus years. Late comers may drive the price higher so hold off on shorts for a few sessions. Aggressive traders can re-establish bearish plays in Treasuries; both 10-yr notes and 30-yr bonds. We're exploring option plays as well as NOB spreads...stay tuned. Not pork bellies but feeder cattle, live cattle and lean hogs are in bull mode and we suggest long exposure. Cattle on feed report out after the close tomorrow so if carrying a large position we suggest lightening up tomorrow. February lean hogs were higher by 1.43% today; our target is 76.50/77.50. December gold broke the 20 day MA and hit the trend line that has held since the August lows. We're expecting another $50-70 dollars. December silver was off by 3.0% but has yet to breach the 20 day MA at $22.90. Prices are 7% off their recent highs but we still feel $20/21 is in the near future. We expect the entire agriculture market to come off in the short run and then we will be getting long ahead of the USDA report 11/9. My biggest interest for clients is to be a buyer of 2011 corn and soybeans as we feel the fight for acreage will be harsh in the coming months. As long as the lows hold and we feel they will we're anticipating a 3-5% dead cat bounce in the dollar. Our advice is bearish plays in the Pound or Loonie.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.