Commodity Update 12/20/11

Crude finished higher for the third day running now gaining 3.45% as of this post. I expect some back and fill but dips that hold $95 in February should be bought. Hedgers should also start working back into their RBOB and heating oil hedges as bounces in Crude likely will lead to higher pricing in the distillates…trade accordingly. Natural gas is a slight winner which has been an aberration. Today being only the second positive showing in the last eight sessions. We're suggesting re-establishing longs in March futures with stops just below yesterday's lows. This goes for fresh entries and the second leg for a scale trade. On a settlement above $3.40 in February I would suggest adding to the trade. WOW is all I can say on the move in stocks…out of nowhere a 3% surge. Sentiment shifts from bearish to neutral but this could mean sideways action into year's end. For the last four days in gold we've seen higher highs and higher lows. As long as this continues look for the stair step higher in pricing but we would not expect too much movement north until 2012. Silver traded higher today as well nearly recouping yesterday's losses. Like gold we could see a bounce but we expect a range of $28.50-$31/ounce until 2012. The dollar is failing after reaching over bought status losing .70% today. I expect further downside and aggressive traders could buy all other crosses with tight stop. My favored plays are the Pound and Euro to play a bounce. Coffee picked 1.5% today…expect a further appreciation and be prepared to sell..stay tuned. Continue to buy dips in cocoa which was higher by 5.5% today. The 50 day MA is almost 15% from current levels and that is a reasonable target on the March contract in my opinion. Treasuries were hit hard today as yesterday may serve as an interim high..stay tuned. If that is the case we will have some bearish trade ideas to follow in both 30-yr bonds and 10-yr notes. Ag's can be bought with stops below the recent lows. …that goes for wheat , corn and soybeans. Continue to work into bullish plays in February lean hogs as I think this market is in the process of setting up for a nice bullish move.