General Comments:
Commodities have been trying to extend the rally we have seen but besides Crude Oil, most commodities are quite a bit below their highs. We are looking for a consolidation range to become the new near term norm. We are expecting a lot of two sided chop with little to no directional bias for some time.
Crude Oil:
Crude oil is in its speculative blow off phase and we could see it run all the way over 120 before beginning to fall back. We are still holding the puts we bought last week and are expecting to add to the position on the next spike to new highs. There is little if any justification for this price and in the near term we see downside momentum as more sustainable than upside.
Natural Gas:
We still see this market nearing a top and remain short. We are looking for the energy sector as a whole to stage a substantial correction this week.
S&P500:
As we mentioned last week, we were exiting our shorts and entering longs at or near 1325. We are now long from an average price of 1334 with stops working below 1355 so we have a 21 point gain locked in at this time. We do not expect the S&P to have much if any follow through ability if it breaks out above 1400 so we are looking to exit our longs at or near 1400 and then again begin to go short.
Bonds:
Bonds really broke down last week and we used that to exit the 119 puts we mentioned in past issues. We are now looking at buying some June 118 calls for 1k or less, targeting a move back to 120 by expiration.
Metals:
Gold had a sizeable break late last week but seems poised to get back to the rally this week. We are still holding our long Butterfly and expect to see Gold retest the 950 level this week. We will begin to exit this trade if possible once we trade above 975. Silver of course followed gold lower late last week and this is a dip I would buy with stops below 1630 basis May. Copper is still consolidating and for now we are flat this market and intend to remain flat until this market shows us what it wants to do next.
Grains:
Wheat continues to trend down and we are still targeting lower prices before we bounce. We are expecting Wheat to find support near 8.00 and would expect a sideways consolidation to begin once that point is tested. Corn did spike above 6.00 but failed to hold it and we are still holding the 580 puts we recommended two weeks ago. We expect to see corn fall back to 5.50 by months end. Beans hit our target at 13.00 and we covered the majority of our shorts. We kept a few on as we see a small possibility that the market could fall all the way to 12.00 before the next bounce. Bottom line here this week is to sell rallies or buy puts on rallies.
Softs:
OJ is still is as wild as ever and after taking some nice profits out of this market these last few weeks we are moving on until we get a clear break out form this consolidation zone. Given all the false starts we have had, I would suggest waiting until the market closes three days in a row at higher prices before chasing the long side. Cocoa is trying to establish a consolidation zone between 2600-2800 we expect this range to hold for the near term and will begin trading this range once we see confirmation that it will hold. Coffee has seen a lot of volatility lately and we are looking for this to increase even more in the near term. We are light buyers below 130 and sellers above 140 but all of these will be at about 25% or normal position size due to the extreme nature of this market. Sugar did not break through 13 as we forecasted last week and is now heading back to the lower end of the range near 11.50. We see this market ranging between these two points in the near term. Cotton is testing support near the 70 level and we are light buyers here with stops below 66 targeting a move back to 80.
