Dollar up & Treasuries up equals all other instruments down as commodities and stocks were hit hard today. We expect this to last maybe a few sessions but traders are going to get great buying opportunities in a number of commodities. Remember be greedy when others are fearful and fearful when others are greedy. Crude oil has lost $10/barrel in the last week and in our estimation has over shot to the downside. We would cover any remaining shorts and start to reverse into longs. My suggestion would be to have 1/4 of the size to start for your long position according to how much exposure you had short. Por ejemplo if you had 10 short contracts start with 2-3 longs. On confirmation of an interim bottom we would build this long position. If we do see a sub $80 trade in November we do not expect those levels to last long...trade accordingly. Most of the damage should be done in the distillates as well as we hinted at a 10-15 cent correction in recent posts and the markets delivered. All things considered natural gas futures down less than 1% today should be viewed as a victory to those positioned long. We continue to like getting long at these levels thinking we get a short squeeze in the coming weeks and a 10-15% appreciation from current levels. Stock indices closed down 2-3% today as investors are not convinced the Fed/government has any clear plan moving forward. My opinion is let the markets work themselves out and for all the bureaucrats to get out of the way. That being said we are nearing the bottom of the recent range and we expect price action to level off followed by a bounce of 5-8%...trade accordingly. Gold lost 3.7%today with prices below the 50 day MA for the first time in nearly 3 months. That level held on a closing basis but $1740-1745 should act as your pivot point. We could see a probe of $1700 in the near future so wade into these waters lightly. Some clients remain in their December ratio spreads but because of the volatility they are not getting hurt too bad. Silver was far uglier today down over 11% also trading under the 50 day MA for the first time in four months. This move may not be over but we like purchasing call options on big down days in this market so aggressive clients started scaling into bull call spreads today. We paid up investing $3,500 per spread but these same positions were over $6,000 just yesterday. Contact us for exact details. The velocity of the appreciation in the dollar is unsustainable. It may not be over but we strongly believe what goes up must come down. The Pound, Swiss and Loonie will be buy recommendations as soon as we see signs of an interim bottom. We like the chart formation in cocoa even though prices were down again today. We maintain our 3000 price objective and continue to advise clients to scale into longs in March. Sugar, cotton and coffee remain the three weakest links in the softs sector but we would not establish new shorts until we get a rally and bearish trades should be closed based on recent activity. Treasuries continue to trade up with no signs of letting up. Maybe bearish trades on the short end of the curve but we've pulled out enough hair trying to play the long end so refrain from fresh entries for now. Aggressive clients started buying March corn today as we've completed a a 61.8% Fibonacci retracement. As long as the 200 day MA holds on a closing basis at $6.50 we remain friendly here. Hold off on any plays in soybeans and wheat for now. A futures spread buy recommendation...buy December soy meal and sell July soy meal looking for the spread to narrow. Live cattle were down limit today which is good for those short. Another 2-3% depreciation and look for an exit door on remaining bearish plays. To take it a step further we may be reversing and getting long February or April contracts so stay tuned.
Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.