Bullish vs. Bearish 9/20/10

When there is bullish news and the market does not move higher or when there is bearish news and the market does not move lower that is a preliminary sign that the underlying market is reaching a turning point. Two sided trade in Crude as the 20 day MA is serving as the pivot point. From here as we expressed in our weekly commentary prices could go $3/4 either direction so we suggest the sidelines until a clearer picture is given. On a trade back near $72/73 in the November contract we would be eager for long entries with clients. With the 6% loss in natural gas prices in the last two sessions we're back at the lower end of the recent trading range. We're suggesting using this set back to scale into longs in November and December futures with tight stops as well purchasing November and December call spreads. Our objectives in the November contract remain the same; $4.58 and then $4.76. Whether it is reaction to a town meeting or renewed optimism ahead of the FOMC tomorrow indices gained 1.4-2.7% lifting prices to four month highs. This breakout will likely attract money from the sidelines thinking this is the start of the next bull leg but we're not of that opinion. We would suggest using this leg to scale into shorts in the ES and have already positioned some of our more aggressive clients in a November 1100/1000 1:2 put spread. It may not be today or tomorrow but in the next several weeks we expect the S&P to be closer to 1050 rather than 1150. Clients that were short coffee from last week were advised to start booking profits on their shorts. From the interim top last week prices have already retreated 8%. The 50 day MA is $1.76 and a 50% Fibonacci retracement drags prices to $1.65. Our conviction remains that sugar prices have gotten ahead of themselves as we've been advising legging into bearish exposure in March 2011 contracts. Our suggestions currently are purchasing out of the money puts or getting shorts futures while simultaneously selling puts. In the coming weeks we expect prices to trade back under 20 cent/lb. On a rally in Treasuries back near 134'00 in 30-yr bonds or 126'00 in 10-yr notes we would have an interest in gaining short exposure for clients again. A bearish Cattle on feed report late last weak could cause some short term pressure on live cattle; to date the 20 day MA at 100.55 has supported. At most we would expect an additional 1.5-2.5% depreciation. Some of our clients exited this morning at even while others decided to hold on. Either way on the December contract we think prices several weeks from now will make new contract highs which are just over 2% from today's close…trade accordingly. Gold managed to close slightly higher but in the last three sessions we've closed on average $6/ounce from the highs. Though we cannot rule out a probe to the $1300 level we still feel a nasty correction may be coming. What does that mean…a $50-80 violent decline. Clients have NO exposure. Doji star on Friday and then a failed rally today in silver…a correction coming? We stepped off the silver bullet over $1 ago with most of our clients so we welcome a retracement. I've cautioned silver traders that this market often takes the stairs higher and then the elevator lower. A 50% retracement brings silver back below $19.50. A trade back to the 100 day MA puts December at $18.64. News of a frost in China over the weekend had grains higher in early dealings but most of the gains were given back by the close. Corn closed 15 cents off its intra-day highs…finally a correction? If so we would look for a minimum of 50 cents before really wanting to do anything more than nibble at longs for clients in 2011 contracts. We will see how soybeans and soy meal act in the next few sessions but we may be willing to get short soy meal for clients if prices settle back below $305 in the December contract. We advised clients to exit their longs in the December Yen at minimal loss today. As far as other crosses risk to reward we see no viable plays for our clients.

MB Wealth Corp. is not responsible and does not endorse anything outside of the content of this article authored by Matthew Bradbard; President of MB Wealth. Benzinga Recommends that you take a look at the Vanguard Total Bond Market ETF

. The BND is the ETF that tracks bonds. The Vanguard Total Bond Market ETF is up .07% in today's session.