M&A is that Enough? 8/30/10

Mergers and Acquisitions are heating up but that alone does not signal an all clear in my opinion. To see continued upside follow thru in Crude the first hurdle we need to overcome is $75.85 in the October contract; the 38.2% Fibonacci retracement level. From current levels we anticipate a 5-8% appreciation in the coming weeks. We expect a move as such in Crude to lift the distillates 12-15 cents lifting prices back over $2/gallon. Talk of increased hurricane activity lifted natural gas prices today. We like the idea of bullish exposure in November but it has been tough to remain vigilant with our bullish stance being prices have faltered 25% in recent weeks. Buying natural gas later this week and holding for 5 weeks has been a profitable proposition 12 out of the last 15 years. Past performance is not indicative of future results. As long as 1042 in the S&P and 9950 hold on a closing basis we expect a bounce out of here. Are we getting clients in bull mode not exactly just expecting a rally to sell in the coming weeks? Clients were advised to get short March 2011 sugar today via options; we’re expecting a 10% move lower in the coming weeks. Cocoa likely will be a a buy in the future but at the moment there are still no signs of an interim bottom. OJ is again on our radar as the sideways congestion in recent weeks may serve as an interim bottom…stay tuned. Treasuries re-couped most of their losses from last week today. Some clients are positioned in put options in December 10-yr notes. This move will either be a re-test of the highs followed by the correction we’re calling for or on a breakout to new highs we will advise cutting losses. If December live cattle fails to make new highs in the next few sessions we will start positioning clients in bearish futures and options plays. Upside has been limited in silver in the last three sessions as prices have closed on an average of 25 cents of their highs. On a trade below $18.90 in the December contract we cannot rule out a trade back to the 100 day MA at $18.37…trade accordingly. We remain bullish corn but it smells like we could get a correction. A trade back to the trend line would be a set back of 20 cents. If a bigger correction could happen anywhere in this sector we suspect the lead candidate to be soybeans. We feel a trade back to the 200 day MA in November at $9.60 is in the cards. We’re getting mixed signals in the wheat market so we advised clients either long or short to move to the sidelines until we get a clearer picture. The US dollar is showing signs of life again; a trade above 83.70 should signal higher ground while a trade below 82.50 should mean lower trade. If forced into the market we think higher trade will be the path. If so expect all the crosses with the exception of the Yen to come off. Clients have every little if any exposure in the currency sector as things are too dicey for my liking.