We’re at the fork in the road in a number of markets. In the next few sessions we will find out who wins the BULLS or BEARS. On a break below the double bottom in December Crude futures at $79.85 look for a test of the 50 day MA at $78.80 followed by a trade down to $77. Our aggressive clients were advised to have a small allocation short December futures or January put spreads. Reminder for every $1 move in Crude futures one should see a 3-4 cent move in the distillates in the same direction as a rule of thumb. The losses in natural gas have been painful; thankfully most clients only have a small position. Being prices are approaching the cost of production we should see prices stabilize from here but we’ve made a decision not to purchase any clients that are not already involved until we see evidence of a true bottom. As of this post a failed rally in the indices. Aggressive clients are fading rallies in ES futures while others are still holding November and December put spreads. New entries are advised to buy just out of the money December ES put spreads.
With the Pound lower and dollar higher it was odd to see cocoa up on the day. We expect this rally to fizzle into next week and remain short via puts with some clients expecting a trade closer to 2600. Wait for further evidence of an interim top to establish bearish positions in cotton and sugar. Most likely we will have some trade recommendations next week. Coffee closed above $2/lb. today for the first time in 15 plus years. Latecomers may drive the price higher so hold off on shorts for a few sessions. (more)
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