Volatility Persists 8/10/11

The VIX, a measure of volatility is at extremes so we should see things calm down in the coming sessions. Volatility likely will not disappear but rather decrease is our thought. As of this post Crude is higher by 3.5% and nearly $7 off its lows from yesterday. We have advised clients to scale into longs expecting a massive bounce and today's inventory report was bullish as well so there are both technical and fundamental reasons to be bullish from here. A 50% Fibonacci retracement lifts the front month back near $90/barrel...trade accordingly. Natural gas traded above but settled just below the 9 day MA FYI. To me this is one of the best looking charts in the entire commodity complex and accordingly we've advised clients to be bullish October. Equities are down just shy of 4% today but that will likely be a lot different by settlement. The bottom line we expect a sizable bounce... we prefer to look from the side lines and be a seller from higher levels. Near 11700/11800 in the Dow and 1235/1245 in the S&P. The path of least resistance remains up in gold with a print above $1800/ounce but we missed this last leg with clients and have no interest until we get a sizable correction...at least 5-7%. Until silver breaks above $40 or below $37 it is tough to say where we go in the immediate future. We would like to be long closer to $35/ounce and at this time have no long or short exposure with clients. The Loonie remains a buy and the Swissie a sell. The only way we would play the franc is with options though as yesterdays 8% spike scared us enough to not trade futures in this instrument right now. OJ closed down limit today continuing to move south after we left the trade...another case of leaving money on the table but remind yourself a profit is a profit...I do every day. Prices have lost 20% in less than two weeks and now we're getting close to shopping longs for clients...stay tuned. Clients have started to nibble in cotton again ahead of tomorrow's USDA. We've suggested bullish exposure in March contacts with a target of $1.10/1.50. Corn and soybeans were flat while wheat caught a bid ahead of tomorrow's USDA. Some clients have light long exposure in November soybeans. The other trade on our radar though we have not acted is a spread trade; buying wheat and selling corn...stay tuned. Lean hogs continued their route closing down now for seven straight sessions. Today we completed a 61.8% Fibonacci retracement. We currently have no client exposure.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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