Be cautious as 3-5% swings are likely to happen on a daily basis. Depending on the contract month Crude oil has spiked 3-9% trading to new contract highs. Though we may see some back and fill we expect the highs overnight to be challenged in the coming sessions and aggressive traders should maintain their bullish posture. The distillates printed new contract highs as the path of least resistance remains up there as well. My only suggestion is trail stops and do not get crazy with your allocation size because eventually what goes up must come down. We advised some of our clients to buy inexpensive April puts against their longs to aid on a correction lower in the coming sessions in Crude oil today. A failed rally in natural gas today but prices ended near unchanged by days end. We suggest scaling into longs and have advised the purchase of at the money May 50 cent bull call spreads. Is the correction we've been calling for in equities finally under way? It is too early to claim victory as our clients positions remain under water...but as of this post the indices are down 2-3%. On a breach of the 20 day MA we would expect more downward movement. Those levels are 12090 in the Dow and 1310 in the S&P. Those wanting short exposure are advised to purchase June ES put spreads. Nothing notable in forex...if the US dollar was to catch a flight to quality bid look to sell other crosses...stay tuned. We advised aggressive clients to get short June live cattle today. If the 20 day MA breaks at 113.75 the trend line should support at 111.00 and we would look to reverse and get clients long. Gold and silver were higher by 0.75% and 2.50% respectively but well off their highs. We still would like to see a retracement before getting clients long. In fact some of our more risk adverse clients have established bearish option plays in April gold expecting a break to $1335/1345. Copper was lower by nearly 4% today doing some major chart damage...expect a trade lower back near $4/lb. in the coming weeks. Cotton was down limit again today for the second day running, giving back 10% in the last two sessions in the May contract. We expect more downside and advise gaining bearish exposure via options. Nearly every Ag was down the daily limit. There is likely more to come but we would use the correction this week to be a buyer of new crop contracts. We should have some more precise long entry points in soybeans, corn and wheat in the coming sessions. We're still holding onto the soybean spread with clients expecting the spread to narrow in the coming weeks (long July/short November). Treasuries are serving as a flight to quality so as long as turmoil persists overseas have a buy dips mentality on the long and short end of the curve.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results
By: Matthew Bradbard
Head Trader, MB Wealth Corp.
email@example.com | 888.920.9997