Days like today in the market separate the men vs. the boys. Any day markets move 5% in just minutes there is an opportunity to make a lot or lose a lot of money almost instantly. Some panic, others capitalize, others watch in awe. We were not in the right place with clients everywhere but today was a good day.
Oil traded below $75 for the first time since mid-February. This move has shaken out a number of longs and though we've yet to buy once the selling slows we may have some long suggestions. From here we could move $5-7 in either direction in a moments notice so we would not suggest either direction. If a rally comes in the distillates we would again advise liquidating longs as an interim top was likely made early this week. Natural gas futures made a new low so depending on your stop placement you most likely were stopped on your long futures. Buying September call spreads remains our top pick here.
The correction has arrived but we did not anticipate this magnitude; intra day the S&P was lower by over 100 points, the Dow over 800 and NASDAQ nearly 200. We used this move to lighten up on some of our shorts but most clients still are holding some ES shorts. Clients were advised to lightly start buying sugar today; most bought October 18 cent calls. Aggressive clients got short cotton today as we are expecting a trade to near 75 cents in July in the weeks to come. The higher 30-yr bonds and 10-yr notes trade the more we're interested in shorts. Clients have yet to move but on a rally on the NFP tomorrow we may start scaling in. The short end of the curve is rolling over. It may make sense to have some downside positions on here.
Soybeans and soy meal got hit hard today losing 2.50% and 1.60% respectively. We will be looking to get clients long but from lower levels. Overnight into tomorrow on a trade lower in corn we would suggesting getting long. June lean hogs closed below the 20 day MA for the first time since we gapped higher in late March; clients remain short. Gold is back above $1200 gaining nearly 3% today. This is flight to quality but we missed the boat as the divergence in other metals had us concerned. Clients have no exposure. The 100 day MA appears to be holding in July silver but we want to wait for the NFP # tomorrow before making a move for clients. July copper closed below the 200 day MA today; we expect more downside.
Futures are the way to trade this market not options in my opinion. MADNESS that is all I can say about currencies today. Clients took off their shorts in the Loonie today in June and lightened up on their September puts. As long as this fear premium is in the market expect the Yen and Dollar to gain and the others to falter. If you cannot stomach volatility look elsewhere.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.