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Financials: June Bonds are currently 14 higher at 143’22, 10 Yr. Notes 7 higher at 119’23.5 and 5 Yr. Notes 4.2 higher at 113’18.2. Yesterday the FOMC left rates unchanged and cited job growth on track, inflation for the calendar year expected to meet projections of 2% and overall Economic Activity continuing to rise at a moderate pace. Not much to “hang one’s hat on”. From the market activity I am guessing that a June rate hike is a fait accompli but Sept. or Dec. only a maybe. In other words everything is advancing at only a moderate pace and the Fed may not need to be aggressively raising rates and may only have 3 increases for the year. That being said, I still feel that rates are ultimately headed higher and that the spread in basis between the 30 YR. and 10 Yr. is too tight at 17-18 points. I am still recommending out of the money puts and/or put spreads. I am also recommending a yield curve spread of short 2 Bonds/long 5 10 Yr. notes should the Bonds rally above 144’16 (as opposed to last weeks’ recommendation of short 3 Bonds/long 5 10 yr. Notes).
Grains: July Corn is currently fractionally lower at 404’6, July Beans 1’4 higher at 1044’4 and Wheat 4’4 lower at 522’2. We have been stopped out of a short May Bean position and will be looking to sell the July contract above 1067’0 should the market rally. This week Corn made a 2 Yr. high and is close to hitting resistance on the July contract in the 411’0 area where I will be willing to try the short side of the market.
Cattle: June LC are currently trading in the 105.00 area. Compare this to the expired April contract which mirrored the cash market in the 123.00-125.00 area. This tells me that the cash will be expected to drop 20 dollars (a hundred weight) in the next 30-60 days or 50 cents to 1.00 dollar a day). Last week I recommended going short June LC in the 106.00-108.00 area, if you went short (the weekly high was 107.80) cover short position below 104.60. I will be a buyer should the market trade below 103.00.
Silver: July Silver is currently 20 cents higher at 16.58, about unchanged from a week ago. I remain long.
S&P’s: June S&P’s are currently 6.00 lower at 2621.5. If you remain long puts either roll into a lower strike price or look for profit taking opportunities. I see support in the 2605.00 area.
Currencies: I remain on the sidelines and will have a recommendation next week. I will be looking at the long side of the Euro and the Pound.