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Analyze the risk before ever looking at return. Successful money management should never be an afterthought it should be the first thought.
- McLean D. Giles | |
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Today's Featured Article
Metals: Gold & Silver
The June Gold finished $10.40 higher to $923.90 per ounce, and the July Silver finished 30.5 cents higher to $14.215 per ounce today.
Only a few months ago selling in the stock market led investors to the flight-to-quality trade of purchasing the metals on stock market weakness, and vice versa. Today, the market has begun to shift from this scenario as strength in the stock market/economy is leading those same traders to start to look at inflation worries which would ultimately drive Gold and Silver higher.
GC: The Gold market continues to remain in a pivotal position from last week, warning for a positive turn from its sideways congestion. After hitting our downside target in our short positions last week, we were stopped out today with a minor loss on our recommendation from 05/05/09 (shown below). On a positive note, we were able to work into the long side of the market based on this same signal. Mid-term, a close over $929.90 will fully turn this market back to the bull camp projecting up to $950.00. Only a close below $910.00 will void the bullish bias.
SI: Since recommending a long position from $12.900 two weeks ago, this market has rallied 132 cents! Our upside target remains $14.500. The big question is if the market will have enough left in the tank to stretch that far. We believe it will, but will err on the side of caution and not risk a close below $13.820 for those still long from $12.900. For Silver's bull run to be voided, the market will need to close under $13.500 before we start to look at the short side again.
New Trade Recommendations: -
Open Trade Recommendations:
05/11/09: (Futures) Long the GCM9 from $921.50, Stop- $910.00, Target- $950.00.
05/05/09: (Futures) Short the GCM9 from $910.00, Stop- $918.50, Target- $865.00. | (Exited at $918.50.)
If you cannot view the Gold chart, go here.
Debt: 10-Year Note & Eurodollar
The June 10-Year Note settled 1 tick higher to 121-09.5, and the June Eurodollar was unchanged, finishing to 99.195 today.
The Treasury Department reported today that the deficit for April was $20.9 billion. If you look back to the same time last year, we had a surplus of $159.3 billion. This time of year, just after tax season, we will typically see a surplus with all the tax dollars being collected. However, this is the first April deficit the government has run in 26 years.
TY: Our bias has been bearish for the Notes over the last month, with the culmination of our downside target of 120-12.0 being hit last Friday. Looking forward, yesterday's close above 120-16.0 has begun to move this market back into the bull camp. A close above 121-14.0 should get things started and projects an initial move back up 122-20.0. Only a close below 120-16.0 will void this signal.
ED: The Eurodollar is hovering around our 99.190 target that we have been writing about over the last few weeks. The market is in a pivotal position as it could go in either direction from here. Technically, a close above 99.210 will rekindle the bulls projecting the market up to 99.400, whereas a close below 99.110 is bearish projecting down to 99.000.
New Trade Recommendations:
05/12/09: (Futures) Buy or Sell a breakout. Buy the EDM9 at 99.210 on a stop, or sell the EDM9 at 99.110 on a stop. (
Sign up for the G-Force Market Report for more trade recommendations.)
05/12/09: (Futures) Buy the TYM9 at 121-14.0 on a stop, do not risk a close below 120-16.0.
Open Trade Recommendations: -
If you cannot view the 10-Year Note chart, go here.
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Stocks: S&P 500 & Dow Jones Industrial Average
The June S&P 500 settled 2.20 points lower to 906.80, and the June Dow Jones settled 34 points lower to 8,436 today.
Companies having to issue new stock in order to increase equity are coming to terms with diluting their stock. This has been weighing on the minds of traders over the last week as the market has been consolidating. Although the market is currently at overbought levels, the market still should have more room to move higher.
SP: We told you yesterday that if the market was to close above 900.00 today we should see a higher market into Friday. Well that is exactly what happened and we expect to see this market push up to the 950.00 level. Only a close below 900.00 will void this bullish outlook.
DJ: We have been long this market since 7,975 and have already hit our first upside objective at 8,350! From here, the market is still warning for further advances higher up to the 8,800 level. Only a close below 8,300 will void this near-term bullish outlook.
New Trade Recommendations: -
Open Trade Recommendations:
04/28/09: (Futures) Long the DJM9 from 7,975, Stop- 8,300, Target- 8,800. (Exited 1/2 of the position at 8,350 on 05/04/09 for excellent trade!)
If you cannot view the Dow chart, go here.
Currencies: Euro Currency & Australian Dollar & Canadian Dollar
The June Euro Currency settled 42 points higher to $1.3637, the June Australian Dollar settled 39 points higher to $0.7632, and the June Canadian Dollar settled 4 points lower to $0.8610 today.
Exports in Canada were down 1.8 percent in March to 32.5 billion Canadian Dollars, while imports were down 4.4 percent to 31.4 billion Canadian Dollars, resulting in net exports of 1.1 billion in March. Over in the U.K, the Office of National Statistics reported that the unemployment rate from January to March was 7.1 percent, which was up 6.7 percent from a month ago, resulting in the highest level since 1997.
EC: Our upside target remains $1.3900 in the June Euro. Only a close below $1.3510 will void the bullish formation.
AD: Sustained action over $0.7600 is needed to further additional rallies in the Australian Dollar. Only a close under $0.7450 will void the near-term bullish outlook.
CD: Sustained action in the Canadian Dollar over $0.8500 will foster additional rallies up to the $0.8800 level. Only a close under $0.8500 will void the near-term bullish outlook and begin to turn this market into the bear camp. With the remaining 1/2 of the long position below, move the protective stop up to $0.8500 to lock in 300 points on that portion should the market correct back farther than we anticipate.
New Trade Recommendations: -
Open Trade Recommendations:
04/27/09: (Futures) Long the CDM9 from $0.8200, Stop- $0.8500, Target- $0.8800. | (Took profits on 1/2 of the position at $0.8530 on 05/05/09! Stop on remaining position at $0.8500.)
If you cannot view the Canadian Dollar chart, go here.
Energy: Crude Oil
The June Crude Oil closed $0.35 higher to $58.85 per barrel today.
The U.S. Department of Energy said that it expects the price of West Texas Intermediate Crude Oil to average about $55 over the second half of 2009, and about $58 in 2010. World consumption is expected to be down 1.8 million barrels per day in 2009.
CL: The market took out the high in January today but was unable to close above it. Has the high been put in? The answer should lie in tomorrow's close. If the market can sustain a trade above $57.95, then the market stands a very good chance at making another run over $60.00. Our bias is still higher with our upside target pegged at $65.00 on our position below. However, we won't risk a close below $56.50 as this will turn the market back to the bear camp.
New Trade Recommendations: -
Open Trade Recommendations:
04/21/09: (Futures) Long the CLM9 from $49.50, Stop- $56.50, Target- $65.00. | (Took profits on 1/2 of the position at $55.00 on 05/06/09.)
If you cannot view the Crude Oil chart, go here.
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Softs: Sugar & Cocoa & Coffee
The July Sugar settled 11 points higher to 15.72 cents per pound, the July Cocoa settled $91 lower to $2,377 per metric ton today, and the July Coffee settled 10 points lower to 128.80 cents per pound.
The USDA estimated that there will only be 289,000 tons of Sugar in the U.S. at the end of the 2009-2010 season. The largest part of the decrease came from the government's restriction on imports. However, total U.S. production is higher, pegged at 8.08 million tons, up from 7.61 million the previous season.
SB: We wrote yesterday that this market should see another push higher up to 16.00 before it's over. Well, we hit that today! And not a moment too soon as the market has drifted back to 15.72. From here, a close under 15.50 will start this market into the bearish camp, but only a close under 15.20 will actually kick in a short recommendation. For now we will wait patiently on the sideline for the trade to develop.
CO: Cocoa was unable to sustain a trade above $2,455 which voids our bullish signal. From here, the market will need to find support near $2,300 to start looking at the buy side of the market again. For now, remove the unfilled working order below. We will look to reenter this market should it close back above $2,450.
KC: The market is overbought and a close below 127.50 projects a move down to 124.00. Only a close above 129.90 will void this bearish pattern.
New Trade Recommendations:
05/12/09: (Futures) Sell the KCN9 at 127.50 on a stop, do not risk a close above 128.50.
05/11/09: (Futures) Buy the CON9 at $2,520 on a stop, do not risk a close below $2.455. | (Unfilled, remove the working order.)
Open Trade Recommendations:
05/11/09: (Futures) Long the SBN9 from 15.40, Stop- 15.40, Target- 16.00. | (Hit the target!)
If you cannot view the Sugar chart, go here.
Livestock: Live Cattle & Lean Hogs
The June Live Cattle finished 7.5 points lower to 83.200 cents per pound, and the June Lean Hogs finished 115 points higher to 68.925 cents per pound today.
The USDA lowered its production for Cash Hog prices in the second quarter due to the H1N1 influenza concerns. They also project prices for Hogs during the second quarter to be from $44 to $46 per hundredweight on a live basis compared with $49 to $51 in last month's report.
LC: Cattle have had a tough time mustering the momentum to trade above 83.500 which they finally did today. However, the market could not hold above the level which is what we need to project another leg higher up towards 85.000. Only a close below 82.500 will turn this market back to the bearish camp. For those in the long position below, move the stop up to a break-even point should the market be unable to sustain a close above 83.500.
LH: We mentioned yesterday that "Today's inside day should be considered a rest day with further advances likely." This kicked in for us today and projects the market up to 71.000. Only a close below 67.500 will void the near-term bullish outlook.
New Trade Recommendations: -
Open Trade Recommendations:
05/11/09: (Futures) Long the LHM9 from 68.700, Stop- 67.500, Target- 70.500.
04/27/09: (Futures) Long the LCM9 from 82.500, Stop- 82.500, Target- 85.000.
If you cannot view the Live Cattle chart,
go here.
Grains: Corn & Soybeans & Wheat
The July Corn closed 6 1/4 cents higher, finishing to $4.27 1/2 per bushel, the July Soybeans were 1 1/2 cents higher, finishing to $11.17 1/2 per bushel, and the July Wheat was 2 cents higher, finishing to $5.92 3/4 per bushel today.
The decline in 2009-2010 U.S. Corn and Bean stocks from the February Forum to the May Crop Report may be the largest ever -- and all before either crop is even half planted. The report should encourage more fund buying and was right in line with our estimates for those following our newsletter and on the long side of the Grain market with us.
C: Cha-Ching! We hit or upside objective today in the July Corn listed below. From here, the market could advance as high as $4.40 but we will look to reenter this market on a minor pullback tomorrow. (
Get the G-Force Market Report for more trade updates.)
S: After recommending a buy in the Soybeans, and 145 cents later, we are still bullish. Today, should be considered another rest day for this market as it should still continue up to the $12.20 and possibly $13.70 level. However, for those who are still not long, buying into a correction would be the optimal trade as we are over-bought currently and should trade neutral to lower over the next day or two.
W: Today's action was great for our long call spread listed below. The market is poised to make another break higher and should move up to the $6.30 level from here. Only a close below $5.65 will void this pattern.
New Trade Recommendations: -
Open Trade Recommendations:
04/30/09: (Futures) Long SN9 from $10.26, Stop- $10.88, Target- $12.00.
04/28/09: (Futures) Long CN9 from $3.89, Stop- $4.01, Target- $4.25. | (Hit the target!)
04/14/09: (Calendar Call Spread) Long the WU9 $6.00 Call and Short the WM9 $6.00 Call for a debit of 21 cents ($1,050). | (Margin= $2,000. This spread will benefit from positive time decay if Wheat rallies over the next 7 weeks. We will attempt to establish the spread for 21 cents with an objective of closing the spread when it widens to a debit of 35 cents (14 cents better). This objective could potentially be achieved in 49 days (by June 2) provided the June Wheat futures contract rallies to at least $5.64 (30 cents higher). Close the spread if June Wheat declines to $5.04. In any event, close the spread no later than June 2nd in 49 days.)
If you cannot view the Soybeans chart,
go here.
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About the Author
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Mr. Giles is the president of G-Force Trading, LLC. He was previously part of the Global Wealth Management Group at Morgan Stanley and received his degree in finance from the University of Colorado at Boulder. G-Force Trading, LLC provides a wide range of services and trading tools while maintaining the specialization of a smaller firm, offering full-service accounts, managed futures accounts, and even discounted trading to self-directed traders. The firm publishes the G-Force Market Report
three times a week, covering over 18 commodities and financial futures markets. Mr. Giles works with clients of all sizes to help them reduce their risk and practice good money management. G-Force Trading, LLC is registered with the Commodity Futures Trading Commissions ("CFTC") as an introducing broker and is a member of the National Futures Association ("NFA") and clears trades through MF Global Inc. For more information, please visit
www.GForceTrading.com or call us toll-free at 1-888-853-2261.
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Special Message from Our Author
Enhance Returns and Lower Overall Volatility
In a climate of ever-increasing market volatility, managed futures can diversify your portfolio and mitigate losses from other investment arenas. Portfolios properly diversified with an allocation to managed futures suffer less significant downturns than portfolios without this component. In contrast to other traditional asset classes, managed futures are flexible mechanisms that can reduce risk by allotting a portion of your assets to a particular area of commodities or financial futures that is inversely correlated to the investments already in your portfolio.
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