December 11, 2009
Matthew Bradbard submits:
After 8 days of selling, Crude is now oversold with the daily stochastic at 10 & 15 in the January contract. Clients have been advised to buy March $5 call spreads as we expect a $5 move higher in the coming weeks. Natural gas is too volatile for our liking currently. We will be looking to buy if prices come down 50 plus cents from current levels at the beginning of 2010.
Nice followthrough in sugar as a breakout is confirmed; sugar has appreciated 8.5% in the last 2 sessions to trade to its highest level in 7 weeks. Clients are positioned long March and May, we’ve suggested futures and options. Play the breakout in equities expecting a 5% move in the direction of the breakout.
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December 11, 2009
One of the major news services Thursday morning had a headline about the Canadian dollar strength. The early headlines routinely attributed strong equities and crude as the cause for the higher Loonie. This seems to be the standard explanation for the ups and downs in the Cad. One story fits all market moves. Well not quite. Currently NYMEX crude is trading at 70.60, while the Brent is 71.45, neither pillars of strength this week. Equities have recovered from the early week sell off, but the averages are still less than last week’s levels. Later, crude was deleted from the headline as a factor for the strength of the Cad.
There was some unusual trade in the Cad yesterday, but it is more involved that the traditional canned explanation. At the Chicago futures market yesterday the open interest increased 17,486 contracts. Since the open interest is now up to 120,704 contracts, this represents a 14.5% increase in the total OI in one day. With such a big increase in the trade, it is very peculiar that the futures market did not have a bigger move. The Cad did gain a little on the dollar yesterday, and technically the market should move in the direction in did on the day the trade was initiated. Perhaps the trade was an adjunct to some activity in the cash market such as price fixing the currency rate on export trades, but the reality is we simply don’t know what happened.
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