Commodities are trying to resume the rally and it may work. We expect to see commodities chop around the current levels for the next week of so while we put in a solid base. We had been looking for a much deeper correction to come in commodities but it now appears that call was premature. While we remain cautious we are looking to cover most of our shorts and begin in some cases to roll into at least short term long trades.
Energy:
While there is no denying the bull flag being formed on the daily charts we expect to see Crude run into resistance below the recent highs and fall back below at least 105. We do expect to break out to the upside from this bull flag, just not this week.
NG:
Natural gas remains high but we are still biased to selling rallies over 9.75 with stops above 10.50. Target a move back below 9.00.
S&P:
This market continues to run into resistance above 1375. If we can close above 1400 it would be a breakout. We however do not expect this to happen yet. We expect to see the market pullback below 1350 and remain range bound for the near term. Any dips below 1325 should be bought with a tight stop. Buying June calls on these dips would also be advised.
Bonds:
Bonds also continue to be range bound. We are still biased to the short side and as such are selling into rallies. This week we are looking to buy ATM puts on rallies above 119.
Metals:
We have been riding metals lower for the last few weeks, we had originally been targeting much lower prices but our models have identified a near term shift than now has us covering our shorts and instead looking to buy dips in gold for the next few weeks. We are looking to target a move back up to at least $950 by months end. Silver is also turning a corner. Buy dips below 18.00 with stops below 16.00 and target a move back above 20.00 in the near term. Copper has moved back to the upper end of its range and we are waiting to see it close above 405 before getting long. If we break out above that resistance then we will become buyers of pullbacks.
Grains:
Wheat remains vulnerable to further downside but should be finding a bottom in the not too distant future. Corn has been unable to break out above 6.00 and we are using that resistance as a place to enter short with tight stops above. Soybeans seem to be holding support and near term look like they have about $1.00 more in near term upside potential.
Softs:
Last week we wrote that we expected to see OJ back over 120 in the coming days, now that we are there we are advising those who bought the calls we recommended to exit at least half of them for 100% profit or more. Cocoa is also turning back up and we are now buyers of dips with stops below last week’s lows. Last week we mentioned buying coffee at or near the 125 level. If you took that you should now move your stops to at least breakeven and hold. Sugar has also bounced and here too we are now buyers of dips with stops below last week’s lows. Support near 70 on cotton has now held and we are also now buying pullbacks here with stops below 67 basis May.
