One Year Later: Are We Any Better Off?

One year ago today equity markets bottomed and a vicious rally ensued but are we any better off than we were at that time? The lack of new buying above $80 hints of a correction to come. Yesterday we made a new high and failed and today we saw a lower high and lower low so I smell correction. Clients own $5 put spreads thinking a trade to $76/75 in the coming weeks. We hate to talk our position but we think natural gas is a BUY. Clients own a light long in April futures and June $5/5.50 call spreads. It is my opinion that this trade is too crowded for the shorts and if we do start to trade higher a short squeeze could happen. The NASDAQ intra-day was above the January highs but the S&P and Dow have yet to reach those extremes. The next few days will be critical to determine where we go from here. Our negative bias remains but as we said yesterday on a close above the January highs in the S&P we would suggest exiting short futures at a loss.

CNBC talking about sugar heading lower to me means we are likely close to a turning point; prices in May were lower by 5.80% today.  May cotton lost just over 2% today; clients are positioned short July via a fence expecting another 4-6 cents. Grains were lower ahead of the USDA report tomorrow. Clients are holding small option positions long corn, long soybean meal and short soybean oil. We advised clients long December corn futures to sell May against their December so they will be flat into the report. April gold traded down to the trend line that has held since the first week of February but I do not trust the action and think that we are headed even lower. I see support below today's lows at $1098 followed by $1086. The trading range in May silver today was 55 cents and thought the action was impressive I still see a trade to $16.50 by mid month. We like the idea of having exposure short copper; depending on your risk tolerance would dictate how you attack it but we think a 10-20% correction could happen at any moment. The Euro and Pound continue to be the weak sisters in the currency market but the swings are too wild for me to be interested in trading. Our lone currency trade for clients is short the Loonie expecting a trade below .9500.

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