General Comments:
Commodities continue to grab headlines, not only in financial news but now also in main stream media. This is a clear sign that commodities as a whole are at or very near a short term top. We are still using these rallies to exit the few long positions we still have on. We have not yet begun to short most of these commodities but have instead begun accumulating puts. Overall we expect the Dollar to firm up this week and that should begin to turn commodities the other way. Again we are not bears of commodities just no longer bulls. We will look to go long again once the coming dip is complete. We will or course alert readers when we begin stepping in to buy the dip.
Energy:
Crude oil is still trying to push higher. We have an OPEC meeting later this week and we expect them to disappoint the bulls by not following through with any production cuts. Overall we see more downside pressure than upside potential over the near term. We are looking to short anything above 102.50 with stops above 105 targeting a move back below 95 later this month.
NG:
Natural gas stopped us out of our short from last week with a small loss but we are still favoring the short side. We continue to sell 9.25 though stops are now working at 9.75.
S&P:
The S&P did try and make it to 1400 last week but fell a little short toping out near 1388 and then pulling back hard since then. We are clearly retesting the lows from the New Year and need to hold support above those levels this week or the stock markets could begin to free fall. We do expect these support levels to hold in the short term but longer term is still very much in question.
Bonds:
Bonds broke out to the upside as stock got hammered and investors ran for cover in bonds as usual. Bonds should be range bound for some time now with the range being roughly between 116 and 120. Range traders take note and look to begin trading the chop.
Metals:
Metals have remained very strong and gold seems poised to test the $1000 level very soon. We are now flat metals after short turned out to be too early. We are still biased to selling this after the $1000 level is hit but until then we will not chase it either way. Silver now over $20 is also becoming increasingly overbought in the near term and should also pullback with Gold. The real key is the Dollar. If it continues to free fall metals will continue to run higher but we are expecting the Dollar to at least stop falling if not actually bouncing over the near term.
Grains:
Grains remain volatile but we are seeing signs that the tide is in fact turning. After exploding last week, wheat has backed off of its high by over $2.50. we are looking for March wheat to go off the board at or below 10.00. Corn is still trending higher but we see momentum slowing. We are looking to sell May corn over 5.50 with stops above 5.75 targeting a move back below 5.00 later in the month. Beans continue to run higher due partially to competition for acreage from corn. We are looking for beans to stall but are not trading it until a clear turn shows itself. Again picking tops or bottoms should only be attempted using options
Softs:
We are long again from 1.25 and those stops are still working at break even. We are now looking for a move to 135. Cocoa continues to push higher and we will not chase it so we are sidelined for now waiting for a blow off move to the top to identify the next potential short entry. Coffee is still pushing higher. We are still looking for the pullback to come back to 1.50 which is where we would like to buy long again, if that never happens then we will just let it go as we do not chase markets. Sugar continues to push higher. We are still holding puts and will continue to hold them for the week ahead. Cotton is seeing an explosive blow off move and this is why we chose not to short and advised readers not to short or chase this market. If you are long keep trailing your stop with the market otherwise stand aside.
