A Much Needed Correction 3/10/11

A correction is underway in Commodities. Crude gave up 2% today and is almost $5 off its recent high. We are anticipating a trade closer to $98/99 into next week in the May contract. On its third attempt today natural gas failed to break above the 20 day MA; in May at $3.99. We remain long futures and own $4.25 calls with some clients, those that own $4/4.50 call spreads were advised to buy back their top leg today to book profits on half the trade. Our target remains $4.25. The indices are trading down 1-1.50 % as of this post.

The next test will be if we can break the 50 day MA on a closing basis; in the Dow at 11950 and 1298 in the S&P. Our bias remains bearish as we finally may get some vindication on our June bear put spreads for clients. The rally is underway in the greenback with an appreciation of nearly 1% today. Our target is 78.50 and we would continue to fade rallies in the Euro, Swissie and Pound. June lean hogs remain a buy on pullbacks but we would book profits on any remaining longs in live cattle as we may see a trade lower after the near 5% advance in the last week. Nothing goes up in a straight line. Intra-day copper violated the 100 day MA…pay very close attention to this in the next few sessions. Gold and silver prices were hit today and we're expecting more downside in the days to come…trade accordingly.

Our target in April gold is $1380 and our target in May silver is $31.50/32.00. Book profits or trail stops in cocoa as prices have lost nearly 10% in the last five sessions. Both sugar and coffee were down approximately 5% today. Across the board we would be advising bearish exposure in the softs sector; cocoa, sugar, cotton, OJ and coffee. The USDA report this morning and outside markets should pressure grains temporarily. We suggest using this setback to buy new crop corn, soybeans and wheat. Continue to let Treasuries rally and either tomorrow or early next week re-establish NOB spreads; short 30-yr bonds and long 10-yr notes.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results

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.

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