Is it possible that the Fed actually raises rates today? With the pattern established over the last year I really wouldn't be surprised either way. More important than the actual results is the reaction going into the holidays. I do admit that I thought the crude lows from August lows would hold. I was wrong on this one as our January crude options are expiring worthless today. Looking forward, I cannot see natural gas moving much lower into the first quarter but have yet to see any signs of strength. I am still bullish in the equities and the softs and bearish in the Japanese Yen. More to follow by Friday.
It took some time but the unemployment numbers finally told us with conviction that the Fed should be raising rates sooner rather than later. Most of our trades with a correlation to a strong US dollar have given us chances to lock in profits by rolling from in the money to at the money options. I have recommended rolling Euro, 30 year bond, and soybean options lower in the last week. I also recommended using some of these profits to establish new positions in cocoa, sugar, and crude oil. I am looking at buying the Nasdaq today. I am also looking to reduce risk again in grain positions on a weak reaction to today's grain report. For specific ideas, give me a call at 928-773-0472.
In the last several days we have seen surprising strength in the equity markets. Although they have been strong for over a month, we have been expecting a correction in order to establish new positions. In the face of US dollar strength, the grains, metals, energies, and livestock have struggled. Although we may see continued weakness in many commodities if the US dollar continues to rise, it still may be time to buy into energy weakness. I would not be in a hurry to rush out and buy natural gas, but I do think that the crude oil is looking attractive at this time. We are advising new option positions in January crude oil now. At the same time, we are recommending risk reduction in bonds, currencies, soybeans, and cattle - roll your put options to lower levels.
Well it was a pretty good day for those of us that were short in the currency markets yesterday. However, we have been waiting for this since the last fed meeting. Our recommendation to hold Euro puts yesterday going into the meeting has paid off and we used the weakness to make some adjustments. We are now holding December put options and are out of long November puts. I still think that the Euro heads lower but it may take a bit of time. If I am correct, one can probably expect to see a weaker bond market. I have been looking for lower bond prices for over a month now and we used the fed news to roll our losing put options up a few strikes. This looks like a wise move as of the time I am writing this post. Stay short bonds and the Euro.
Many have been nervous about the equity US markets following other global equities lower over the last few months. Although I have not been screaming for all to rush out and buy equities in September or early October, I wish I had. The US equity markets look constructive at this point and I am looking for dips to buy into the Nasdaq and perhaps the S&P 500. I would expect any two day selloffs to be a buying opportunity.
It has taken some patience but we are finally seeing some significant pressure in the Euro currency. My last post suggested that the US Dollar would rise against the Euro and the Yen. Our reversal price points were hit in the Euro on 10/14/15. I would think that recent pressure will take the Euro below recent support at 111.20. Stay short.
In the grain markets...my suggestion to be short in the soybean or soybean oil market has not been profitable for the last several weeks. However, wheat has taken over as one of the weakest markets that I follow. Yesterday on my newsletter, I recommended purchasing wheat puts. I expect to see a test of the August lows. You can still buy these options today.
On the 14th of October our reversal price points were triggered in the Euro currency and the Swiss Franc. When you combine this with my previous signal to short 30 year bonds, traders may want to reevaluate any bullish commodity trades. We exited our gold options last week and are now starting to see evidence that the coffee and hog markets could give us some new opportunities to get short soon. I expect to see US dollar strength in the next several sessions. Stay tuned.
Yesterday we recommended selling natural gas by buying December put spreads, see our newsletter. Today it appears that we are seeing a reversal lower from a higher open. If it holds and you wish to sell, look to enter on a higher open tomorrow. Live cattle also look to be regaining bearish momentum.
After watching the US Dollar fall for the last seven sessions, many are wondering if the Fed will ever raise rates. I may be all alone here but feel that longer term positions can be bought here. This is the third attempt for the bond market to push through 159^0. I would expect that if we do see bond prices moving higher it will be short lived. I remain long term bullish the USD.
If you have a strong opinion on currency direction, take a look at the Japanese Yen and the Euro currency. Both of these markets have had very little direction in the last several weeks. This lack of direction has created low volatility. Whether you are bearish or bullish, you might find a bargain in the November or December options. My guess is that the USD strengthens against these currencies and am recommending put options today.