The March Dollar Index is down 3.5 ticks at 75.465 this morning as I write.  The included chart shows that the down trend in the dollar continues, although for the past month, prices have been wavering back and forth.  Prices seem to be attempting to challenge in the direction of the recent contract lows of 74.89 reached two weeks ago.  The historical low for the dollar index is 70.695 made in March 2008.  Barring any changes in the attitude at the Fed, I would expect the dollar to eventually challenge those historical lows in the months to come.  Given the trading activity as of late, I recommend standing aside in the dollar index for now.  I don’t see any good trades to do from a risk reward standpoint.  The directional movement indicators, all seem to be falling along with the ADX line suggesting that there is no solid trending market in the short run.  The longer term charts still show the solid down trending dollar market, just not the short term.

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.

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March Treasury Bonds are up 10/32 at 120:19 this morning as I write.  The chart included shows that T-Bonds are attempting to break out above the last several day consolidation this morning.  A close above this consolidation could put the bonds in position to challenge the early October highs in the 123:00 area.  The directional movement indicators are basically right on top of each other showing a slight bias to the bull side.  The ADX line continues to fall suggesting no strong trending movement.  The overall trend is up which is a concern for our current covered put write position.  I will be watching this particular position today and may decide to liquidate if prices continue to rally.  When a market continues to rally when the theoretical fundamentals are supposedly so bearish, then you have to go with what the chart says.  This chart is beginning to say that the bond market wants to rally despite all the talk about how much supply will be coming to market over time to finance the growing national debt.  As mentioned last week; there may be a problem attracting foreign investors, but when certain institutions can borrow from the Fed at virtually zero interest and then buy US Treasury securities for 4% yield and higher, it is a no brainer to lock in that spread.  That game will end when the Fed begins to raise rates which is not expected any time soon.

 Followers should also be long one March Bond (114:00 strike) put from 2 12/64 and short 2 March Bond (110:00 strike) put options from 1 9/64 each for an overall credit of 6/64 or $93.75 gross.

You should also be long one March Bond (108:00 strike) put option from 52/64 and short 2 March Bond (105:00 strike) put options from 29/64 each or an overall credit of 6/64 or $93.75 gross.

And finally, you should be short one March T-bond futures contract from an average cost basis of 118:16 and short one March T-Bond (121:00 strike) put option from 3 24/64.

March options expire in 87 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.

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The December Corn $4.30/$4.50 call spread expired worthless on Friday at the December option expiration.  We had three of those spreads that expired, and the resulting loss turned out to be $262.50 gross, total for all three spreads combined.

Today, I will begin covering the March contract.  March corn is up 6 ½ cents at $$4.13 ½ this morning as I write.  The weaker dollar is the main reason for the strength.  I am not hearing anything about the crop condition which is bothersome.  The enclosed chart shows that March corn is in a bull move with strong support down near the $3.80 area.  The strong resistance is in the $4.25 area.  Basis the March contract, my technical chart objective for March corn is in the $4.60 area.

 Followers of this letter should be short 1 March Corn ($3.20 strike) put option from 6 ½ cents, and 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.  There are 88 days left until March options expire.

 If March corn prices ever close below the $3.80 area, I would hope that the producers have already liquidated most if not all of their corn that needs to be sold.

Producers should have up to 75% of their crops hedged with put option strategies or 50% hedged and have sold a portion of their crop already.  If prices spike past $4.00, consider selling more of your crops along the way as prices trade higher hopefully towards my target of $4.50.  I wouldn’t hold out for $4.60 because prices may never get there.  Instead, steadily scale out of your corn holdings.

For those of you who need to look at hedging next year’s crop, you may want to consider locking in some prices for next year’s corn crop as December 2010 prices reach into the $4.50 to $4.90 area. 

 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.

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The December Mini S&P Index is up 18.25 points at 1108.25 this morning as I write.  The enclosed chart shows that the S&P remains in a strong uptrend that is now testing its recent rally highs in the 1112.00 area.  Based on the last two corrections and rallies, the target for this rally should be in the 1115.00 area.  But since we have figured that out by observation, it probably won’t happen like that again.  The bottom line is that, despite all the ‘talking heads” that you hear about that are worried about the stock market or predicting a big selloff, the trend remains upward.  The “wall of worry” is being climbed!  I will start to worry when everyone gets complacent about the rally.  That doesn’t mean that you shouldn’t take some stock profits along the way or buy some protection with either the purchase of put options or writing calls against stock that you already own.  I recommend standing aside in the S&P futures for now, because there is now low risk reward way to enter the market from here.  Please note that as emotionally good it feels that the market is up today on a strong move; prices are still within the trading range of the past week or two.  This is where the TV business channels can get people all emotional and charged up to put on trades that they may regret later.  Keep the emotions out of the trading.  Pretend like you are shopping for tennis shoes.  Do you want to buy them on sale at $50 a pair or do you want to pay full retail at $120 or higher per pair? 

 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.

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March Crude Oil is up $2.35 per barrel at $81.46 this morning as I write as the US dollar drops in value sharply.  The enclosed chart shows that the overall trend in crude oil remains to the upside.  The chart also shows that today’s rally so far is just returning prices back towards the upper end of the trading range that has existed in crude oil for the past month.  That trading range is defined on the March chart between about $78.00 to $84.00.  Until prices close outside of that range, all these sharp rallies and selloff’s are just noise.  I have to admit that emotions seem to be getting higher.

For today, I recommend attempting to buy one March Crude Oil ($107 strike) call option and sell 2 March Crude Oil ($115 strike) call options at an overall credit of 20 cents or $200 gross.  If filled and prices never reach the $107 area in 86 days, then the options will expire worthless and we will keep the $200.  The maximum possible gain would be if March Crude closes right at $115 in 86 days, and that profit would be about $8000, the difference between the strike prices.  The risk would be if March Crude oil prices reach up to and beyond the $115 area well before the expiration date.  As prices approach the $115 area, we would need to exit the trade, hopefully with a profit.  The erosion of time as prices approach the $115 area would be good for us.

 Followers of this letter should have the following positions:

 Followers should also be 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 86 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.

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December Natural Gas is up 13.2 cents at $4.556 this morning as I write.  The enclosed chart shows an impressive three day rally in natural gas coming off of mostly bearish news the past several days.  It could be that all the bearish news is currently discounted in the price of natural gas, or it could be that a major cold front is expected to hit the US later this week.  I am betting on the latter.   The enclosed chart shows that the overall trend in natural gas is lower, but prices have gotten oversold, so a near term short covering correction is not a surprise coinciding with a cold front.  The directional movement indicators are bearish but narrowing.  The ADX line which has been rising is starting to flatten, which could suggest a bottom in prices in the near term.

December natural gas options expire today!  Therefore, our put options at the $4.35 and $4.15 level will expire worthless if prices close above those levels today.  Our short call option at the $5.50 level will also expire worthless today if prices don’t rally that high by the close.  That will leave us with one long December futures contract which we will either liquidate at the close or drag a very close stop.  Tomorrow is the last trading day for the December futures contract, so we would need to be out by then either way.

I still recommend trying to liquidate our far our delivery month position into 2012 at the price stated below.

 Followers of this letter should be:

Long one December Natural Gas from $5.721 and short one December Natural Gas ($5.50 strike) call option from 60 cents.

Long one December Natural Gas ($4.35 strike) put option from 18.4 cents.

Long one December Natural gas ($4.15 strike) put option from 9.4 cents.

 December option expiration is today!!. 

 Followers should also be long one December 2012 Natural Gas from $7.25.  Near term, I will be looking to liquidate this trade at $7.26 GTC.

 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.

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All of our remaining December Gold option positions will be exercised and liquidated today, so I am beginning to cover the February contract at this time.   I will report the overall gain in the December positions tomorrow.

February Gold is sharply higher this morning, up $22.30 per ounce at $1170.50 as I write going along with a sharply lower US Dollar.  The enclosed chart shows that the directional movement indicators are bullish along with the ADX line sharply rising.  Please note that the gold market is getting way over bought in the near term and caution should be observed.  Although I still believe that gold will eventually rise to $1350 in the first quarter of next year, that doesn’t mean that a large correction won’t happen along the way.  Don’t be surprised the see $50 to $100 corrections in gold from this point on.  Please do not try to play the corrections as these moves when they come will probably only last days before seeing sharp rebounds.  Trade with the trend only!  Be patient for chances to add to bullish trades.  Don’t chase this market right now!  This  increase in volatility was expected and the coming sharp drops are expected going forward.  As the volatility in gold and other commodities increase over time, you will see why I never recommended being in the futures contracts, buy rather call and put spreads.  The people in futures contracts will be humbled like no one business if they happen to be on the wrong side of an overnight $50 move.  Stay tuned because those days are fast approaching.  When the ADX line begins to bend over, prices will be vulnerable to a big drop.  Stay tuned.

 For today, I recommend attempting to take profits on our February $1100/$1130 call spread at a credit of $21.50.

 Short 1 December Gold ($970 strike) call option at $58.00 per ounce.       (December gold options expire today!).

Long 1 December Gold ($1100 strike) call option at $16.30 per ounce.

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Long 2 February Gold ($960 strike) put options at $10.40 each.

Short 4 February Gold ($935 strike) put options at $6.20 each.

Long 2 February Gold ($970 strike) put options at $10.60 each.                  (February Gold options expire in 64 days).

Short 4 February Gold ($950 strike) put options at $6.80 each.

Long 1 February Gold ($1100 strike) call option at $32.60.

Short 1 February Gold ($1130 strike) call option at $24.60.

Long 1 February Gold ($1140 strike) call option at $23.90.

Short 1 February Gold ($1180 strike) call option at $16.90.

Long 1 February Gold ($1175 strike) call option at $22.20.

Short 2 February Gold ($1225 strike) call option at $12.50 each.

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

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Long 1 April Gold ($1210 strike) call option at $33.00.

Short 2 April Gold ($1300 strike) call option at $17.50 each.

Long 1 April Gold ($1275 strike) call option at $17.80 per ounce.

Short 2 April Gold ($1400 strike) call options at $9.90 per ounce each

Long 1 April Gold ($1375 strike) call option at $11.80.

Short 2 April Gold ($1500 strike) call option at $6.90 each.

 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.

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March Treasury Bonds are down 11/32 at 119:29 this morning as I write.  The enclosed chart shows that the T-Bonds have stalled on their near term rally right in the middle of the trading range of the past couple of months.  The directional movement indicators are slightly to the bull side but both lines are edging lower along with the ADX line suggesting that there really is no trending market at this time.  As we approach Thanksgiving holiday this week, I would expect the trading volume to slow down.  Stay with current positions for now.

 Our December 115:00/113:00 ratio put spread expired on Friday, worthless.  That means that the $62.50 they paid us up front to do that trade is ours to keep.  It is nice to be paid for trades that don’t work out.

 Followers should also be long one March Bond (114:00 strike) put from 2 12/64 and short 2 March Bond (110:00 strike) put options from 1 9/64 each for an overall credit of 6/64 or $93.75 gross.

You should also be long one March Bond (108:00 strike) put option from 52/64 and short 2 March Bond (105:00 strike) put options from 29/64 each or an overall credit of 6/64 or $93.75 gross.

And finally, you should be short one March T-bond futures contract from an average cost basis of 118:16 and short one March T-Bond (121:00 strike) put option from 3 24/64.

March options expire in 88 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.

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I am back to covering the December contract until the December Options expire, considering that if the euro breaks out to the upside now, it could wake up our ratio call spread.

The December Euro is up 137 ticks at 1.4992 this morning as I write.  The enclosed chart shows that the euro, once again, challenged its 40 day moving average that has been support for this market over the past several months.  The test held and now is reversing prices back up towards the recent contract highs in the 1.5050 area.  I still expect those highs to eventually come out and see prices challenge the all time highs at 1.6000.  We still own our December 1.58/1.60 ratio call spread that we will continue to hold on to.  On Friday we put on a March 1.385/1.340 ratio put spread for an overall credit of 13 ticks or a gross credit of $162.50. 

The directional movement indicators, which have been wavering back and forth from bullish to bearish and back again, are poised to cross back to the bullish side.  The ADX line continues to drop suggesting that there is no strong trending market, yet.  My longer term trend indicators are all bullish on the euro.

Followers of this letter should also be long one December Euro (158.00 strike) call option from 32 ticks and short 2 December Euro (160.00 strike) call options from 20 ticks each for a combined credit of 8 ticks or $100 gross.  Option expiration is in 11 days.

Followers should also 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.

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.

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The March Dollar Index is down 61 ticks at 75.475 this morning as I write.  The enclosed chart shows that the dollar really hasn’t gone anywhere over the past four weeks accept trade in a 200 tick range despite all the talk on TV and in newsprint about its affect on commodity prices.  The volatility in commodity prices has been on worries about what the dollar might do rather than what it has actually done.  It is amazing how talk and chatter can move markets over periods of time.  The three day rally last week just put the dollar back to its 40 day moving average which has held the dollar back over the last several months.  Now prices are heading back to their recent contract lows.  The longer term trend is still for a lower dollar.  We will stand aside in the dollar for now.

 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.

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