Market Overview

Buy the rumor Sell the fact 2/15/11


A valuable trading lesson that needs to be applied when making trading decisions are made especially in commodities. Chart damage was done on Crude oil in the last two sessions as we should see another $3-5 of downside before we see significant buying come in. We will be establishing longs in July $5 call spreads over the next several sessions not trying to time an absolute bottom but we suggest holding off on any futures trades for the time being.

We continue to like layering in bull call spreads in May natural gas expecting a bounce from the current levels. At the money May positions cost approximately $1700/per spread. Indices look toppy but we've been saying that for weeks. Get a confirmed break and then look to gain bearish exposure but until a confirmation we're just gambling. We expect the dollar to grind higher but see no viable trading strategies in fx at the moment. On a further break in live cattle we will be advising bullish plays but not until we see a 2-3% retracement…stay tuned.

Gold and silver should continue to track higher but we would suggest lightening up on longs as the easy money for now has been made on bullish plays…in our opinion. We are not advising shorts but do feel we can get long with clients from lower levels in the coming weeks in both metals. A potential key reversal in coffee today with prices closing 2% off their highs. Cotton may challenge their record highs but we still advise fading rallies in both coffee and cotton via options. Agriculture broke lower today…my advice is trail stops on shorts or start taking profits as this correction is likely short lived. Clients took a quick profit on their soybean oil shorts from yesterday. In terms of a new trade idea we suggested buying July soybeans and selling November soybeans today on a spread trade (old crop vs. new crop). In the Treasury complex we still like NOB spreads; long 30-yr against a short in 10-yr.

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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