What I've learned of late as volatility picks up it sometimes works to scale in and out of positions as opposed to trying to time tops and bottoms. Crude traded down nearly 2% today but the 50 day MA acted as stiff support. Aggressive futures traders could start scaling into longs and remain long as long as the 100 day MA is not breached on a closing basis. As for options we will be exploring May $5 call spreads for clients early next week. Mixed signals in the jobs report today as unemployment dropped to 9% but very few jobs were added. We suggest the sidelines but will be quick to get short once a correction starts. We do feel a 5-10% set back is over due but we've been voicing that for several weeks. The dollar continue higher today gaining just nearly 1.5% in the last three sessions. We are not dollar bulls but do expect a trade to 79/79.50 in the coming sessions. To play a bounce in the dollar we suggest fading rallies in the Euro and Pound. We like cattle to the upside but did not like today's action so we advised clients to move to the sidelines taking a minimal loss. Another reason is we decided to buy the same clients corn and did not want to own both cattle and corn being the heavy correlation of late. Silver closed above the 50 day MA, gold was well off its highs by close but we did challenge the 100 day MA. That level in April at $1360 will serve as the pivot point into next week. We suggest longs in silver via futures and options or some type of silver/gold ratio trade. Cotton traded down the daily limit today while coffee gave up 0.80%. We suggest gaining bearish options exposure in both soft commodities looking for a 10% depreciation. We have yet to get clients long futures in corn but we did start gaining exposure via options today. Our trade suggestion was to buy May call options while simultaneously buying inexpensive March puts just for a hedge into next week's USDA report. Ultimately we are bullish with a target of $7.25/7.50 but if we're wrong the puts should lessen the pain. The long end and short end of the curve looks to trade lower...we suggest bearish exposure from 30-yr bonds to Euro-dollars.
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