Overnight, March Corn was down 1 ¾ cents at $4.15 ¼.  The included chart shows that March Corn continues to trade within the $3.75 to $4.25 trading range.  The latest rally over the last few days has shown some promise that something new is occurring.  The evidence for something new occurring in corn prices comes because the rally high of a couple days ago took out the previous rally high from a week ago and the with the rally, the purple ADX line has begun to rise, which hasn’t occurred throughout this whole consolidation range.  Today, the directional movement indicators continue to be bullish and the ADX line continues to rise.  Yesterday, we added to our bullish posture by adding the following May corn positions.  Yesterday, we sold one May Corn $3.70 put option for 9 cents, or $450 gross credit.  We also bought one May Corn $4.30 call option for 29 ¼ cents and sold one March Corn $4.60 call option for 18 ¾ cents.  So the call spread cost 10 ½ cents.  Combined with the short put option and the total overall cost of this combination trade was 1 ½ cents or $75.  A few hundred dollars of margin collateral was also required because we are naked short one put option at the $3.70 level.

May corn option expiration is in 114 days.  So what are the possibilities for this trade?  Well, at expiration, if May corn finishes above $3.70 and below $4.30, then the loss will be $75 gross.  The maximum gain at expiration would be if prices close over $4.60, and then the profit would be 28 ½ cents or $1425 gross.  The risk is unlimited if prices begin to fall below $3.70 because of the short naked put.  Between here and expiration, if May corn prices begin falling below the recent trading range in the $3.75 to $3.80 area, then I would be wanting to liquidate the trade.  Also, if May corn prices rally sharply in the near term, I may just take early profits on the whole trade.  If May corn prices rally steadily over the next month, the short put will drop in value and we may have an opportunity to liquidate that part of the trade early.  So, there are a lot of possibilities with this trade as prices move and time goes on.

 Followers of this letter should be:

 Long one March Corn ($4.30 strike) call option from 17 ¼ cents and short 2 March Corn ($4.90 strike) call options at 7 3/8 cents each.  (As a result of the profit made on the short $3.20 puts, our cost basis of this ratio spread is now a 1 cent credit!)

There are 51 days left until March corn options expire.

 Short one May Corn ($3.70 strike) put option from 9 cents or $450 gross credit.

Long one May Corn ($4.30 strike) call option from 29 ¼ cents and short one May Corn ($4.60 strike) call option from 18 ¾ cents for an overall cost of 10 ½ cents or $525 gross.

There are 114 days until May corn options expire.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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The March Mini S&P Index is down 1 point at 1121.00 this morning as I write.  The included chart shows that the S&P index continues to steadily work its way higher in price.  This slow pace of a rally is driving some analysts nuts as they have all be expecting and hoping for a 10% or more correction for months, only to see small pull backs that lead toward rallies to higher highs.  I believe that this current rally in the stock market will continue until most of these for mentioned analysts finally throw in the towel and get long.  Major market turns or major corrections usually happen when not many people are looking for them, or when investors become so complacent that they say they aren’t worried about a correction because they are confident that they will just buy more stocks before the stock go higher in price.  That is certainly not the case right now which leads me to believe that higher stock prices are ahead for awhile until the psychology changes.  A major news event could always change everything, but trying to trade markets on major, rarely occurring, news events is not a good way to consistently make money.  We could trade the markets on expectations of the end of the world, but that event never happens, and if it ever did, who would care anyway?  I am content to hold on to our newly placed deep in-the-money covered call write trade, along with our ratio call and ratio put spreads.

 Followers of this letter should be:

 Long one March Mini S&P (1190.00 strike) call option from 17.00 points and short 2 March Mini S&P (1220.00 strike) call options from 9.50 points each for a total credit of 2.00 points or $100 gross.

Long one March Mini S&P (1000.00 strike) put option from 23.00 points and short 2 March Mini S&P (935.00 strike) put options from 12.75 points each for a total credit of 2.50 points or $125 gross.

Long one March Mini S&P futures contract from 1125.50 and short one March Mini S&P (1080.00 strike) call option from 70.75 points. (This is a deep in-the-money covered write trade.)

March Mini S&P options expire in 79 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Crude Oil is up 8 cents at $79.67 this morning as I write.  The included chart shows that March crude oil is beginning to struggle as prices approach the down trend line, marked in light blue, just above the $80.00 level.  If prices fail up here, then I would look for prices to return back down to the mid to lower $70’s per barrel once again.  The longer term secular trend for crude oil is still up, but we still may have to go through several weeks of base building before that uptrend resumes.  We will let the charts tell us.  The directional movement indicators are slightly bullish and the ADX line is still falling suggesting that there is no strength behind this near term up move.  I recommend holding our current ratio put spreads.

 Followers of this letter should have the following positions:

 Long one March Crude Oil ($69.00 strike) put option from $2.90

Short 2 March Crude Oil ($64.00 strike) put options from $1.65 each.

Long one March Crude Oil ($62.00 strike) put option from $1.51.

Short 2 March Crude Oil ($57.00 strike) put options from 83 cents each.

 March Crude Oil options expire in 49 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Natural Gas is down 1.8 cents at $5.796 this morning as I write.  The included chart shows that March natural gas is still involved in a near term uptrend, although prices have been stalling up here in the $6.00 area, about 20 cents shy of the October highs.  Cold weather is and has been the driver of this current rally.  The cold weather is expected to hang around through January 10^th according to forecasters.  Natural gas prices are starting to act like they have already discounted that weather forecast.  Also, keep in mind that cold weather alone won’t hold up the natural gas market.  We will need to see temperatures that are below the normally cold temperatures for this time of the year to really dig into the oversupplied natural gas market.  Normally seasonally cold temperatures won’t cut it.  It is also interesting to note that the far out delivery months, a couple years out, are all within about 10 cents of their contract lows, giving more confirmation that this current near term rally is only cold weather driven.  For a long term trend to develop, we need to see industrial demand rise and production fall off a bit further.  As mentioned yesterday, I expect prices to fall again but not necessarily make any new lows.  This will all be a part of a long term basing process in natural gas that may take weeks or months to complete.  For now, stand aside.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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February Gold is down $5.50 per ounce at $1092.60 this morning as I write.  The included chart shows that February gold is still correcting off of its price highs made three weeks ago in early December.  The directional movement indicators are still bearish and the ADX line continues to fall.  I believe that this is a large correction in gold that is part of a major long term secular bull market.  The best thing to do right now is to be patient and wait for the charts to give us clues as to when it is time to put on more bullish positions again.  Until then, gold prices could fall further in the near term.  The lows in February Gold a week ago in the $1075 area may turn out to be important lows considering that those lows were very near the 90 day moving average, and near the area where gold broke out to the upside in early November following India’s purchase of 200 tonnes of gold from the IMF in October.  I would think that if the $1075 area doesn’t hold, then a test back toward the $1045 area where India actually bought the gold would be the next potential low.  Again, let’s be patient and wait for evidence of a low in this correction before getting aggressive again.

 Followers of this newsletter should have the following positions:

 Long 2 February Gold ($960 strike) put options at $10.40 each. (The cost basis is zero if you consider the profit made on the short $935 puts that were associated with this trade originally).

Long 2 February Gold ($970 strike) put options at $10.60 each.  (the cost basis is zero if you consider the profit made on the short $950 puts that were associated with this trade originally).               

Long 1 February gold ($1270 strike) call option at an average cost basis of $5.00 per ounce.

(February Gold options expire in 27 days).

__________________________________________________________________________________________________________

Long 1 April Gold ($1210 strike) call option at $33.00.  (The cost basis is now $23.00 if you consider the covering of the one short April Gold $1300 call option on December 22^nd).

Short 1 April Gold ($1300 strike) call option at $17.50 each.

Long 1 April Gold ($1275 strike) call option at $17.80 per ounce.   (The cost basis is now $11.90 if you consider the covering of the one short April Gold $1400 call option on December 21^st).              

Short 1 April Gold ($1400 strike) call options at $9.90 per ounce each

Long 1 April Gold ($1375 strike) call option at $11.80.  (The cost basis is now zero if you consider the covering of the two short April Gold $1500 call options on December 22^nd).

 (April Gold options expire in 85 days).

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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The March Euro is down 12 ticks in quiet trading at 1.4338 this morning as I write.  The included chart shows that the March Euro is still well entrenched in an intermediate term down trend  The directional movement indicators are bearish, but the ADX line is beginning to flatten out.  This may be an early warning sign that the down trend in the Euro may be running out of steam.  Since much of the potential gain in the covered put write Euro trade has already been realized, let’s go ahead and take profits on that trade.  I recommend liquidating the short March Euro futures contract and buying back to liquidate the short March Euro 1.5100 strike put option at around 820 ticks, the current price.  Hold on to the rest of our trades.

 Followers should be long one March Euro (1.3850 strike) put from 121 ticks and short 2 March Euro (1.3400 strike) put options from 67 ticks each for an overall credit of 13 ticks or $162.50 gross.

You should also be long one March Euro (1.5750 strike) call option at 134 ticks and short 2 March Euro (1.6100 strike) calls at 75 ticks each for an overall credit of 16 ticks or $200 gross.

You should also be short one March Euro futures contract form 1.4769, and short one March Euro (1.5100 strike) put at 535 ticks, or $6687.50. (Being liquidated today!!)

 March Euro options expire in 65 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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The March Dollar Index is up 10.5 ticks at 78.29 this morning as I write.  The dollar index is still in an intermediate term up trend.  The directional movement indicators are bullish and the ADX line continues to edge higher at a slower pace.  Although the price is not close right now, I still continue to recommend attempted to cover the short March Dollar 79.00 call option at 80 ticks GTC, and also to leave our protective stop at the same level.

 Followers of this letter should be long one March Dollar Index futures contract from 76.585, and be using a protective stop at 77.15 GTC. 

You should also be short one March Dollar Index (79.00 strike) call option from 130 ticks or $1300 gross.

There are 65 days left until the March Dollar index options expire.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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March Treasury Bonds are up 4/32 at 115:17 this morning as I write.  The included chart shows that March T-bonds are still in an intermediate term down trend.  The directional movement indicators are bearish and the ADX line continues to rise confirming the strength of the downtrend.  The double top and break down the other day project that March T-bonds should fall towards the 111:00 area eventually.  As we approach the New Year’s holiday, expect that trading volume will fall.  I recommend holding on to our existing positions.

 Followers should be:

 Long one March Bond (114:00 strike) put option from 2 12/64. (Cost basis of 28/64, or $437.50, if you include the buy back of the two short 110:00 put options on December 8th).

Long one March Bond (108:00 strike) put option from 52/64.  (Cost basis of 2/64, or $31.25, if you include the buy back of the two short 105:00 put options on December 8th).

Long one March Bond (117:00 strike) put option from 128/64.

Short one March Bond (113:00 strike) put option from 51/64.

March options expire in 51 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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Overnight, March Corn was unchanged at $4.16 per bushel following an impressive rally within the trading range yesterday.  The included chart shows that rally.  What may be very important about yesterday’s rally is that fact that prices managed to close above the minor rally high from a week ago and the ADX line has now begun to turn upward while the directional movement indicators are bullish.  I believe that most of the farmer selling is behind us and the long positions that the futures funds hold are beginning to win the battle.  Today, I recommend a multi faceted trade in May Corn.  I recommend attempting to sell short one May Corn $3.70 strike put option for around 9 cents, and then attempting to buy one May Corn $4.30/$4.60 vertical call spread for about 10.5 cents.  The short put strike is located just under the recent trading range and the premium received would pay for most of the call spread that we want to purchase.  If everything works perfectly and rallies, the potential gain in this trade would be the difference between call strikes, $30 cents, plus the short put option premium of 9 cents, minus the cost of the call spread, 10.5 cents for an overall gain of 28.5 cents or $1425 gross.  That is of course if we hold the trade all the way to expiration.  The risk on this trade is 1.5 cents if prices stay above $3.70 and below $4.30 all the way to expiration.  If May corn prices trade below $3.70, the our risk would be unlimited.  I would be recommending to liquidate the trade if prices closed below $3.70, if not much sooner.  In the near term, if prices break out to the upside and reach past $4.60, I would probably look to take profits on the entire trade early, whatever that may be at the time.  I also recommend holding our other positions already in place for now.

 Followers of this letter should be long one March Corn ($4.30 strike) call option from 17 ¼ cents and short 2 March Corn ($4.90 strike) call options at 7 3/8 cents each.  (As a result of the profit made on the short $3.20 puts, our cost basis of this ratio spread is now a 1 cent credit!)

There are 52 days left until March options expire.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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The March Mini S&P Index is up 1.50 points at 1124.50 this morning as I write.  The included chart shows the current reluctant uptrend continue to trudge higher.  These kinds of bull moves can last for long periods of time as I have mentioned in past letters.  There are still too many analysts looking for corrections and no one that I know of is complacent about the market.  Remember, major tops happen when everyone is complacent about the market and only predicting how high the market is going to go and no one is worried about corrections.  That is not the case right now.  I still look for this stock market to continue to work higher.  The directional movement indicators are bullish and the ADX line is rising.  Yesterday, following my recommendation, we bought one March Mini S&P futures contract at 1125.50 and sold one deep in-the-money March 1080.00 strike call option at 70.75 points.  This means that in 80 days when the option expired, if the March Mini S&P closes above 1080.00 then our short call option will be exercised.  The result would be a futures loss of 45.50 points (the difference between 1080 and 1125.50), but we would keep the option premium of 70.75 points, so the overall result would be a gross gain of 25.25 points or $1262.50.  I did the trade this way so that we have a lot of downside protection and the expectation that stock index prices will continue to rise very slowly over time.  I do not expect to wait until expiration to liquidate this trade.  Over some time, if prices work higher and begin to stall, I will probably take whatever profit is available at the time and liquidate.  By the way, the 1080.00 level is a very important price level to hold for this bull move.  Don’t forget that we also have both ration call and ratio put spreads to attempt to take advantage of larger bull or bear moves should they take place in the intermediate term.  If those types of trends don’t occur within the expiration time, no problem, because we did those spreads for credits anyway.

 Followers of this letter should be:

 Long one March Mini S&P (1190.00 strike) call option from 17.00 points and short 2 March Mini S&P (1220.00 strike) call options from 9.50 points each for a total credit of 2.00 points or $100 gross.

Long one March Mini S&P (1000.00 strike) put option from 23.00 points and short 2 March Mini S&P (935.00 strike) put options from 12.75 points each for a total credit of 2.50 points or $125 gross.

Long one March Mini S&P futures contract from 1125.50 and short one March Mini S&P (1080.00 strike) call option from 70.75 points.

March Mini S&P options expire in 80 days.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.

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