If you’re not able to swallow volatility we suggest taking the next few sessions off because 2-5% swings may become daily occurrences. A potential triple top in Crude may serve as a significant hurdle at $87.50 in the December contract after today’s reversal. At this point if long with a profit we advise tightening up stops. We could see $3-4 in either direction depending on tomorrow’s inventory report. January natural gas has gained just over 6% in the last four sessions closing above the 50 day MA today for the first time since late June. We’re suggesting bullish exposure in January futures and options.
Indices may have hit an interim top ... though we’re not advising shorts we may get enough of a retracement to get clients back even or potentially a profit on their remaining December ES put options. We have yet to get clients short or long 30-year bonds or 10-year notes and would suggest the sidelines until at least after the G-20 meeting.
A 38.2% Fibonacci retracement would put the S&P back at 1150 and the Dow at 10800. The softs sector may have been the best performing sector with cocoa a gainer by 2.25%, sugar a fresh 30-year high up by 3.85%, cotton up limit, OJ higher by 4% and coffee also a gainer by just over 4%. Sure there is no inflation but my grocery bill is not what it used to be. Remain long lean hogs and live cattle as long as the recent lows hold. 30-year bonds posted a four month low as investors apparently aren’t willing to tie up their funds for these low rates anymore ... about time the light bulb goes off. A key reversal in corn and wheat today as we should see more downside in the short run. As for corn do not rule our ’11 contract filling the gap from last month before making new highs. Soybeans held onto most of their gains closing 4.25% higher on a significant crop reduction. Based on today’s USDA soybeans could see much higher pricing. Expect trade ideas in the coming sessions.
Silver briefly traded above $29/ounce but as of this post prices are nearly $2.50 off their highs. Gold is over $30 from its record high print today. These markets are not for the faint of heart and only aggressive traders should be in the metals in this environment. We feel there is more upside but it will be far from a smooth ride. Could this be the dead cat bounce we we’re forecasting in the US dollar with today’s near 1% appreciation? If so we could get a 3-5% depreciation in other crosses immediately. Stay alert because this could be a violent next few sessions.
