It's all about oil

Financials: Mar. Bonds are currently 1’00 lower at 158’18, 10 Yr. Notes 14 lower at 128’07.5 and 5 Yr. Notes 9 lower at 119’29.2. In the last 2 sessions Oil has rallied off of multi year lows by more than three dollars continuing “risk on” trading, rallying equities and breaking interest rate vehicles ccausing an uptick in yields. 10 Yr. Note yields droped below 2% temporarily and are now back over this benchmark yielding about 2.04%. I am taking this recent decline in the long 5 Yr./short 10 Yr. spread to liquidate positions and lessen the loss. I remain spread long Jun.16 /short Jun.17 Eurodollars.

Grains: Mar. Corn is currently 1’4 higher at at 368’4, Mar. Beans 5’2 higher at 883’6, Mar. Chi. Wheat 0’4 higher at 475’4 and Mar. KC Wheat 2’0 higher at 473’4. We remain spread long KC/ short Chi. Wheat. I will be a buyer in Mar. Corn on a 10 cent break or a close above the 375’0 level.

Cattle: Live and Feeder Cattle closed sharply higher to limit up in a continuing volatile trade. Many of my readers have asked about my risk tolerance in this sector and I will address by saying in the current atmosphere of extreme volatility I suggest a 4.00 ($1600 in Live Cattle) initial risk for an outright position with a smaller unit size (example: I have reduced my unit size from 5 contracts to 2 contracts because of the increased risk) and a $400 initial risk on spreads. I currently want to go long Apr.LC/short Aug.LC below the 11.70 level premium Apr. I will also go long Apr. in the 126.00 level if the market allows.

Silver: Mar. Silver is currently 4 cents higher at 14.13 and Apr. Gold 2 dollars lower at 1096.00. I remain long. It is time to roll Feb. Gold positions into Apr. contracts.

S&P's: Mar. S&P’s are currently 27.50 higher at 1888.50. Equities have rallied over the last 2 sessions in lockstep with the rally in oil. I still feel that rallies need to be sold and will once again go short. Resistance is currently in the 1885.00-1905.00 level and support in the 1830.00-1840.00 area. Without intentionally trying to be glib, we are only into the third week of the New Year, we have not seen the highs or the lows. BE FLEXIBLE!

Currencies: As of this writing the Mar. Euro is currently 68 lower at 1.0824, the Yen 53 lower at 0.8465, the Pound 112 higher at 1.4329 and the Dollar Index 31 higher at 99.440. We continue to hold a long position in the Yen either with futures or the 87.00 call (of which we have rolled up from the 85.00 call). I am also short the Dollar Index from prices below the market. I am looking for a reason to add to the short Dollar Index position and will do so on a close below the 98.30 level.