Natural gas spread exploding

Gross domestic product climbed at a 4.1% annualized rate, the strongest since the final three months of 2011 and up from a previous estimate of 3.6%, Commerce Department figures showed this morning. The Chicago Board Options Exchange Volatility Index (VIX) dropped 6.4% today to 13.25. “If we’re making progress in terms of inflation and continued job gains, then I imagine we’ll continue to do, probably at each meeting, a measured reduction” in purchases, Bernanke said, calling $10 billion in the “general range” for a “modest” reduction. If the economy slows, the Fed may “skip a meeting or two,” and if the economy accelerates it may taper a “bit faster.”

Equities: The MAR14 E-mini S&P 500 (CME:ESH14) is up 11.75 points today to 1813.75. 1819.50 is our next technical target from our market profile analysis, with 1811 as the key pivot level. We believe this is a bull market, and has a potential to head to 1819.50 and possibly higher after that. With a positive GDP reading, the stock market seems to feel more and more comfortable trending higher due to underlying strength in the economy. We believe another 25% year in 2014 is unlikely due to the winding down of the Fed’s stimulus policies.

Bonds: The MAR14 U.S. 30-year bond market (CBOT:ZBH14) is up 20 ticks to 129’26. The MAR14 US10yr note is up 6 ticks to 123’27. We believe January could be a very bearish month for bonds, especially if we see a good jobs number on the first Friday of January. Our favorite taper trade in the interest rate markets is the Eurodollar JUN15/JUN16 spread. We think this spread will keep trending higher as the later month may go down faster/more than the earlier month.

Currencies: The MAR14 USD (NYBOT:DXH14) is down 9.5 ticks to 80.695 after hitting a key 81 level this morning. We still believe that the USD index has potential to trend higher in Q12014, possibly completing a technical pattern to 82.60. The MAR14 Aussie dollar has had a good rally this morning, up 72 ticks to 88.77, while the MAR14 Pound is down 24 ticks to 163.40. The MAR14 Swissie is up 49 ticks to 111.87. 112.25 is our next key resistance level.

Commodities: MAR14 coffee (NYBOT:KCH14) has jumped up over 2 cents today to $1.1590. We believe coffee could approach $1.20 very soon. FEB14 gold (COMEX:GCG14) dipped below $1200 yesterday, but is making a small recovery today to $1204. We believe the $1,100-$1,200 range will serve as the base for gold. We are watching the MAR14 (NYMEX:NGH14)/JUN14 (NYMEX:NGM13) Natural gas spread, which has recently exploded to 295. We believe this may be approaching overbought levels, and our next resistance area for this spread is around 340. JAN14 RBOB (COMEX:HGH14) continues its strength, trading up $.0336 to $277.37. We still believe copper is headed higher to at least $3.35, this pertains to the MAR14 contract.

About the Author
Anthony Lazzara

Anthony Lazzara, CEO of Newport Beach, Calif., commodities investment firm Lido Isle Advisors, spent 10 years as a trader and floor broker at the Chicago Board of Trade and Chicago Mercantile Exchange. Anthony has significant experience in the energy, fixed income, and equity futures markets. After being a long-time independent futures trader, Anthony saw a tremendous opportunity to educate investors on how to invest in professional traders. Anthony is now focused on his duty as CEO of Lido Isle Advisors.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome