Possible bottom in Nat. Gas, Live Cattle

Financials: Mar. Bonds are currently 1 lower at 156’11, 10 Yr. Notes 1 lower at 126’14.5 and 5 Yr. Notes unchanged at 118’21.0. As everyone knows the Fed raised rates last week by 25 basis points in what appears to be a premptive hike in anticipation of continued improvement of the economy. Conventional interpretation of the the Fed’s comments is that there will be 4 similar rate hikes over the next 12 months. Under closer examination the market seems to be rejecting the dictum of “don’t fade the Fed” and pricing in 2-3 rate hikes. If there is one thing I’ve learned over the years it is to follow the adage of not fading the Fed. Commodity prices have now been on the downswing for over 5 years and I do not feel it will take much to ratchet up inflation of 2.00% or more to justify further rate hikes. I am continuing to hold the long 5 Yr. /short 10 Yr. spread having reduced positions from long 3-5Yr./short 2 10 Yr. Notes to a ratio of 1:1 for this spread.

Grains: Mar. Corn is currently 0’6 higher at 375’2, Mar. Beans 2’2 higher at 894’6 and Mar. Wheat 0’2 higher at 487’0. We were stopped out of long Mar. Corn positions when the market trade through the 369’0 level last week putting us on the sidelines for the moment. We continue to hold the long Mar. KC Wheat/short Chi. Wheat spread.

Cattle: Live and Feeder Cattle closed last week on a strong note (limit up on Friday) as packers finally started to bid in the cash market. To add to this Friday’s Cattle on Feed Report showed fewer placements than anticipated and fairly good marketings. Early indications, given the small number of bids this early in the a.m., are for a sharply higher opening. The market has expanded limits today because of Fri. limit up closing.

Silver: Mar. Silver is currently 3 cents higher at 14.14 and Feb. Gold 3.00 higher at 1068.00. We continue to hold a small long position.

S&P's: Mar. S&P’s are currently 16.00 higher at 2008.00. Last week the market fell sharply and “covered the spread” of support of 2015.00 and resistance of 2070 colsing well below support in the 1992.00 area. I look for support in the 1980-1986 area and resistance in the c2014 area favoring the short side of the market. Of note: The 200 day moving average is xat 2038.68.

Currencies: As of this writing the Mar. Euro is currently 2 higher at 1.0894, the Yen 9 higher at 0.8257, the Pound 19 lower at 1.4896, and the Dollar Index 4 higher at 98.725. I am currentlyy on the sidelines but feel overall that the Yen will remain strong as there is talk of a bump upward in interest rates and that the Dollar Index has topped out. I will try selling the Dollar Index on a rally.

Last week I noted that Nat. Gas is near long term support and I want to be a buyer. I am willing to go long the cFeb. With an initial risk of the Jan. contract low of 1.6850. Technically I have an objective of the 2.022 level which fills the gap left between Dec. 12-14th.