Indices look overbought but have for weeks now…brave clients are sticking with the June put options. Today they purchased June 1050 ES puts for $550/per. Sugar came within 17 ticks or 16 cents and then closed 9% off that low. Buyers were active but I want to ensure this is just not another head fake before trying to get clients long again.

May cotton is back below the 20 day MA losing 1.50 cents today. We are expecting further down side and have a target or 78.00 and then 76.00. OJ paired losses but did close lower now for 7 out of the last 8 sessions dragging prices back below the 50 day MA. We have told clients that we are interested in re-visiting longs under $1.30.

Treasuries were hit hard across the curve today; likely due the exorbitant auctions. We may NOT get the opportunity to sell from higher levels as we had expected but if prices continue south it will be without our clients. Corn and KCBOT were the lone agriculture commodities to keep their head above water today.

You know the deal; we are suggesting long exposure via futures and options in July and December corn. Some of our clients that trade spreads may be interested in this: long December KCBOT wheat against a short in December CBOT wheat at 7-9 cents under expecting the spread to flip and KCBOT to be at a premium.

Let cattle rally a little more and look to fade the rally; June would need to be contained at 94.00 and August at 92.00 or we would abandon the trade. Lean hogs continued lower; we expect a trade under 70.00 in April in the coming sessions. Precious to industrial metals were hit today; gold 1.70%, silver 2.6%, copper 1.5%, palladium 4.7%, and platinum 1.8%.

We are looking for more downside pressure in this complex especially if the dollar can stay above 82.00. The significance of the 82 level in the US dollar index serves as the 50% Fibonacci level for the last 2 years. Use 81.25-81.50 as support with 84.00 as the next stop on the upside.

The Yen got hit the hardest today and though I did not take people seriously who were whispering par just weeks ago this could happen. We are pricing out bearish plays for clients. If the Loonie can break the 20 day MA; at .9740 in June we should be on our way to a nice winning trade on clients June puts.

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

Though there is far more profit potential being short or long futures in oil at the moment we prefer sleeping at night and have advised clients to trade options until we get a clearer direction if they intend holding overnight. We are still thinking a set back of $4-6 is likely in the coming days/weeks and have not ruled out a trade back to $70/barrel. Could a 5% down move today be the capitulation low that natural gas needed to find a bottom?

Being prices are this close on the front month it is likely to challenge a trade below $4. Prices have not seen that handle in 7 months. Clients were advised to put in limit orders to buy back the top leg of their June call spreads today. It would take a slightly lower trade to get filled.

Sugar has put in 2 consecutive positive showings for the first time in 1 month. Lets try this again…as long as prices do not close below 18 cents on the May contract we like being long very lightly as we’ve been burned before. Assuming this low holds a trade back to 23 cents could happen quickly.

A safer play could be to trade spreads or options as opposed to futures. OJ traded a nickel lower intra-day but managed to close above a trend line that has held since last fall. We would like to see more downside and should if we can break the aforementioned trend line.

Clients exited their May soybean oil puts at a  loss of $90/per. Corn is back above the 20 day moving average and as we indicated yesterday we like being long. We are looking for a trade back to the previous resistance in the coming weeks to month; about 60 cents above today’s close. Live cattle a gainer by another 1.5% today to fresh highs; though it is tough hold off selling until we see signs of a top.

Gold and silver remained range bound again today with silver off a touch and gold inching higher. The dollar raced higher today taking all other crosses lower with the Euro getting hit the hardest. Roles have once again shifted and now the Euro and Pound are a sale on rallies as opposed to a buy on dips. Our lone currency play is short the Loonie; an interim top perhaps yesterday?

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

Because investors and traders are bullish on the stock market again the money flow into the safe havens like Gold and Silver decrease. I believe this is the reason stocks moved up last week while precious metals drifted lower.

Below are three charts (Dollar, Gold and Silver) showing what I think is most likely to happen in the coming week or two.

.

US Dollar Index – Daily Chart

The US Dollar has put in a very nice bounce/rally since the low in November 2009. Last month the dollar finally reached a key resistance level of 81. I have been talking about this major resistance level since January as the Dollar would find it difficult to break above this level.

Take a look at the daily chart below. You can see a head & shoulders pattern and a neckline which appears to have broken late Friday afternoon. There is a strong chance we could see 78 reached which is the measured move down. If we get follow through selling this week then I would expect 78 to be touched within 5-10 days.

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GLD & SLV ETF Trading Charts

Precious metals have been moving very well for us recently. From looking at the charts using technical analysis we were able to catch the Feb. 5th low and also the Feb. 25th low on a several ETF’s.

As you can see from the GLD and SLV charts, both metals are not in an uptrend showing bullish chart patterns and trading at support. If we see the US Dollar break down next week then be ready to go long gold, silver and stocks.

.Precious Metals, Stocks and the Dollar Trading Conclusion:

As a technical analyst the above charts are pointing to higher prices in the coming day’s which is exciting for us all. BUT when things are this perfect looking we must be very cautious as the market has way to suck people into setups like this and spit them out a couple days later for a nasty loss.

Understanding how the market moves is crucial for avoiding and/or minimizing losses when trades go against us. That is why I continue to wait for my signature low risk setup before putting any money to work.

My focus is to take the least amount of trades possible each year, only focusing on the best of the best setups. My low risk setups require downside risk to be under 3% for the investment of choice when the broad market shows signs of strength, as well. I use several different types of analysis to confirm if a setup has a high probability of winning and those which do are the trades I take along with my subscribers.

It is very important to wait for the market to confirm a move higher before taking a position with this type of setup. The market could go either way quickly and jumping the gun is not a safe bet.

Get My Precious Metals and Index ETF Trading Alerts: www.TheGoldAndOilGuy.com

Chris Vermeulen

Since last November, the dollar has climbed steadily against a basket of currencies — most notably against the euro. And based on my analysis, I think it’s just the early stages of this trend.

In fact, for many of the reasons I’ve discussed in past Money and Markets columns, the weight of evidence suggests that we’ve likely seen the bottom in the dollar, with a multi-year bull market ahead.

That’s a high level view. But how are things shaping up on a shorter term outlook for the buck?

Let’s take a look at the four stages of this prospective dollar bull market and the immediate catalysts that should underpin its continued strength …

Stage 1:

Marking the Bottom

My analysis of the seven-year cycles in the dollar index suggests a cyclical bottom was marked when the dollar rallied sharply off of its all-time lows in 2008 driven by the uncertainty surrounding a growing financial and economic crisis.

Back then, capital fled all areas of the world in search of safety. And the dollar represented a safe parking place.

Stage 2:

Retracement Period

Investors shunned the dollar in search of bigger returns.

Then we had the deep retracement of 2009. The global economy was showing signs of stabilization that encouraged global investors to start dipping their toes back in the water … i.e. taking risk again. That’s when capital was reversed out of the dollar in search of higher risk, higher return assets.

And just when sentiment was about as negative toward the dollar as it could possibly get, we were introduced to the first sign of collateral damage from the financial/economic crisis and the unprecedented government responses: Crumbling government finances.

The first wobbling sovereign nation, Dubai, quickly splashed water on the face of an increasingly optimistic global investment community. All of the sudden the theories of a V-shaped recovery became fractured by the realization that the widespread economic crisis could run deeper — a scenario that many had conveniently and complacently dismissed.

Stage 3:

More Fear; More Risk Aversion

The dollar has benefited from weakness in the pound.

In recent months much of the dollar strength has been driven by fears of a sovereign debt crisis. And much of that strength has come at the expense of the euro and the British pound.

We’ve seen the dominos of a potential sovereign debt crisis line up, as I detailed in last week’s column. The tremors that started in Dubai, quickly turned scrutiny toward Greece and the other weak spots in the euro zone (Portugal, Italy, Ireland and Spain). And it appears increasingly likely to soon weigh on the UK economy and the British pound.

As we know, currencies don’t operate in a vacuum. They’re valued relative to the value of another currency. So, given the recent concerns about the future of the euro and the increasing spotlight on the next sovereign debt domino, the UK, the dollar is benefiting primarily because of the weakness of other major currencies.

And there’s another developing situation that should offer more fuel for the dollar …

Stage 4:

A Falling Yen

The euro, the British pound and the Japanese yen make up 83 percent of the dollar index, the often quoted proxy for the economic firepower of the U.S. dollar on a global level.

Japan’s deflation has taken a toll on the yen.

While the pound and the euro have been under assault in recent weeks, the yen has been pushed and pulled in a tug of war: Strengthening as capital flows out of risky euro/yen and pound/yen positions, and weakening on the basis of fundamental divergences between the recovering U.S. economy and the deflation-burdened Japanese economy.

But the fundamental evidence has been clearly favoring the dollar relative to the yen for some time. What’s been lacking is a catalyst to send it higher.

Well, over the past two weeks we’ve finally gotten a clear catalyst to sell the yen against the dollar.

Catalyst for Yen Weakness

Back in August 2009, it became cheaper to borrow dollars (compared to borrowing yen) for the first time in sixteen years. In the chart below, you can see when the short-term interbank borrowing rate for dollars (Dollar Libor, the blue line) crossed below the equivalent interbank borrowing rate for yen (Yen Libor, the red line).

Source: Bloomberg

What looks like a minor rate differential can have a major impact on market perception. Since that cross occurred, the dollar lost as much as 13 percent against the yen as global investors began favoring dollars, as opposed to yen, to fund carry trades … i.e. selling dollars to fund the purchase of high yielding currencies.

But as of last week, this differential has crossed back, once again making the Japanese yen the cheapest currency in the world to borrow. And based on the diverging policy paths of the U.S. and Japanese central banks, this differential should continue to widen in favor of U.S. rates and dollar strength relative to the yen.

So given the ongoing crisis surrounding the euro, the vulnerability of the British pound from a continued spread of sovereign debt concerns AND the catalyst for a weakening yen, I’m expecting the dollar to continue its upward path against major currencies both in the short-term and longer-term.

Regards,

Bryan

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This does not feel like Spring Break to me as I need to be glued to the screens. The good news being I live in Ft Lauderdale it may feel like Spring Break at the beaches this weekend. A small victory today as we had a bearish engulfing candle in oil. As of this post prices are $2 off their intra-day highs. We were lucky enough to buy back our bottom legs this morning when oil was positive and now clients own May $75 puts and should be able to profit on the trade as prices make their way closer to $77/76. $5 put spreads that were bought within the last few session stay put looking for lower trade. It has been a long 5 weeks as natural gas lost another 15 cents this week. We are lonely in this trade as most people doubt we can turn around anytime soon but clients  remain long via future and options as they believe as do I that we will be back over $5 within a month. Clients still hold June puts in the ES and SP but as prices closed at a fresh high yesterday we advised them to cut losses on futures. We still think we could get a nasty correction but until the markets tops there is no reason to fight the tape. Next week will be key in sugar to see if the almost 35% correction was enough to attract fresh buying. We think it was and expect a grind higher from here. Cotton rallied about 2% today; it was too good to be true down all 5 sessions this week. Clients are short still looking for 75/76 cents in May. Corn has been down for the last 7 session but it has only dropped 20 cents in that time frame. We like being long via options and futures and have advised clients to lift all their short hedges. I would favor July options to May and if interested in futures we would trade the new crop December futures. May soybean oil is down 3.5% in the last 2 sessions; another 1-2% and we would look to book profits on shorts. Stay out of cattle’s path; April made a new high today lifting prices to levels not seen since the fall of 2008. We feel we are close to a top but like stocks there is no reason to jump in front of a freight train. There will be a time and place to get short and we will advise when but not yet. April gold traded below $1100 but closed just above that level. We think more down side is likely and currently own NO gold for clients. Likewise with silver we feel we could get some pressure short term. Assuming the recent H/L a 38.2% Fibonacci retracement is $16.40 and 50% is $16.10. The closer prices are to $15.75 the more aggressive of a buyer we would likely be for clients. Copper prices really did not go anywhere but we did close down all 5 sessions this week. We are thinking if we see another leg down here or overseas copper could get hit 10-20%. The dollar closed down for the third consecutive week and ended below the 34 day moving average for the first time since mid-January. If the dollar continues lower look for all the currencies to temporarily gain. We are using the volatility to scalp intra-day for clients in the Pound and Yen. Clients remain short the Loonie via June puts and took some heat today but should be fine in the coming weeks.

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

Matthew Bradbard
MB Wealth Corp.
(954) 929-9898
(954) 929-9993 fax
matt@mbwealth.com
www.MBwealth.com

Please do not place any trade orders via email as they will not be executed.

Trading in commodity futures and options involves substantial risk of loss. Past performance is not indicative of future results.

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