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With all of the daily volatility that traders see in commodities and stocks, consider trading the Mini Contracts instead of the big contracts to limit your exposure in the market place. The Mini Crude Oil is half of the big contract, while Grains, Mini S&P and Nasdaq, and the Silver market are a 1/5 the value of the big contract. Trading these Mini contracts will enable you to add to winning positions, and help you stay in the market place overnight with margins being a 1/5 to 1/2 of what the big contracts maintain. With the big moves that the markets make today, trading Mini contracts will still enable you to still make good money on winning trades.

As we write this article, April Gold is down $21 at $896.00 per troy ounce, in spite of the fact the June U.S. Dollar is down 60 ticks today. Over the last number of weeks the Gold/U.S. Dollar inverse relationship has somewhat disappeared with Gold and the Dollar seemingly trading hand in hand with one another. This might be explained with the reasoning that both the Gold and U.S. Dollar are acting as flight to quality safe havens in the face of worldwide economic upheaval.

A person could argue against this point by looking at a chart of the June S&P and April Gold over the last couple of weeks. On February 20th, the June S&P traded at 766.25 and over the next few weeks fell down to its low point on 3/6 at 662.75. In that same period of time the April Gold traded from its high on 2/20 of $1,007.50 to $930.50 on March 6th. As the S&P crashed through lows not seen since 1997, April Gold seemed to be brought lower as well. Gold no longer acted on a flight to quality scare in spite of the fact that stocks were bleeding all over the place, and physical Gold was still in heavy demand. In fact, from sources Gold had purchases in the first two months of the year equivalent of 68% of all global gold mine production. Also, there are reports that the Central Banks of Venezuela, Russia, and Ecuador bought the equivalent of 22% production, making that 90% of the world mine production accounted for with just four entities.

Perhaps that Gold has moved lower over the last few weeks, the argument that the world economy has already screeched to a halt and the severe slowdown in the economies will not let inflation surface quite yet. Bank of England and Bank of Japan spoke of quantitative easing overnight, and the FOMC meeting results come out this afternoon and could show new ideas to battle the severe slow down threat in the U.S. economy. Typically, one would have expected that news of quantitative easing from a number of foreign banks would have rekindled inflationary fears and interest in Gold, but apparently there is something else keeping the market at bay today.

The June S&P has recovered nicely since the low of 662.75 on March 6th, as the market has gained over 100 handles in a little less than two weeks. The June S&P is down a bit today as the FOMC results loom later this afternoon. With the Bank of England and the Bank of Japan both talking about quantitative easing overnight, one has to wonder if the U.S. Fed is starting to get back into a corner enough to start buying U.S. Treasuries. In the event the FED does not provide some positive dialogue at 1:15 P.M. today, then we suspect that the market will see a bit of a correction before approaching the 800.00 and eventually 816.00 level. The market place is also looking for more merger news or buyout action this week such as IBM purchasing Sun Microsystems to keep the bulls in control of the market.

After the FOMC results, consider going long the June Mini S&P contract on a dip and look to take the trade up 30 handles initially and possibly attaining 816.00 shortly thereafter. One thing that has to be recognized over the last few weeks is that selling is being met with support, and that support has helped stage this nice recovery in the stock market. This occurrence has not been seen in some time and has to been seen a positive for the stock market.

Continue to ride the recovery in the stock market, but consider quickly exiting all long contracts on news of any big bank or corporate failure such as GM; the U.S. public will not tolerate another AIG bailout after this latest outcry. This is important because the next time a derivative default bomb hits the market, the U.S. Congress is going to have its hands tied behind its back, having no bullets for a bailout scenario. When and if this happens, the S&P might quickly approach the 600 level. For the time being, enjoy the stock market rally, but ready to pounce on the short side again with the next big economic failure.

The May Soybeans contract managed to trade above Monday's highs yesterday, and while they closed higher on the day, it was only by two cents. With the short-term bias Bullish, this market needs to see a trade above the 950^0 area to change the look on the longer-term. The longer we go without achieving these levels, the more precarious it becomes to remain Bullish. There are some obvious areas of resistance just above at the 926^0 level and the 940^0 level, but again, a trade and close above 950^0 could really set the table. Add to that the potential for any planting delays due to wet conditions, and just like that we could be talking about $10 Beans.

If the May Soybeans fall below 880 however, and all bets are off for the time being, on the down side watch the 880 level. While May Beans funds some support in the 900^0 area, and then again around 890^0, it would be prudent to hold off buying these Beans below that 880^0 level.

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The May Corn had difficulty yesterday and could not even hit Monday's high. While the Corn looked poised to challenge the 400^0 level, we see a market that is now struggling on the upside. The Planting Intentions report is due out at the end of the March, and that report coupled with talk of Farmer selling may keep a lid on this market near term. We could see a break of ten cents here pretty quickly. The bottom line, one probably does not want to stay long if the May Corn breaks 367^0, but before that number is challenged, watch the 380^0 level.

However, if the contract can trade and close back above this morning's highs today (391^0), we could make a fast run for those late January highs, which takes us up to the 410^0 area. If not currently in the market though, stand aside unless you are an aggressive trader. In any event, use caution here and watch those support and resistance levels.

The May Crude Oil gave us quite a nice trade on the long side here Monday. What limited the upside, though, was 50.00 area; the May Crude just could not take it out. So far this week it has set up a nice two-way trade. We entered long Monday around 44.85, and I wish I could say we reversed when we took profits, but that was not the case. In hindsight, that 50.00 level was a pretty darn good area to short against. This type of scenario may be the norm here for a while and is the reason you may want to take a profit of a dollar or more any time you can get it, long or short! One of the questions we have to ask ourselves though is this: Was this last rally a product of stock market euphoria? Well it seems that was the case. Let's face it, demand is not exactly great right now, and there sure isn't a shortage of supply.

So, if we can get up near that $50 level, consider shorting the market but with the next resistance around the 50.90 area, you may want to place your stops just above the $51 level. (Don't forget, the mini Crude is a nice way to limit your exposure.) This could be significant today as the FOMC meeting winds down and there is potential for the stock market to rally if they send the right message to the investors. The FOMC results could be the force to get us back up into the 49.00 plus area for entry, closer to that 50.00 point.

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Bill Borkowski is a retail broker at Dorman Trading, LLC. A 12-year veteran of the futures markets, Bill has traveled around the country doing the seminar circuits. Bill works with clients of all kinds, offering support to online as well as full service traders.

Full Service at Discount Prices

Full service brokerage at discount prices... What else could you need? How about a complimentary 2-week trial of Dorman Direct? Learn how to get full service brokerage at discount rates. Contingency orders, OCOs, trailing stops, price alerts -- let us handle the details. Learn more here »