May 19, 2008

Market Comments for May 19, 2008

1) Crude futures are moving towards contango, indicating a near term easing of supply fears. Contango exists when the far dated futures contracts are selling for more than front month futures, the normal condition in commodity futures markets (because your have to pay interest to maintain a long position). Please see my earlier recommendation to sell out of the money crude calls. In the meantime the president of OPEC said there would be no meeting until September, and no increase in production quotas until then.

2) A sign of the rise of emerging markets: India's top paid cricket player has signed a three year contract for $40 million. India now has 53 billionaires. Economic growth came in at 9% in 2007 and will fall back to 8% this year. BUY.

3) Singapore Airlines has launched the world's longest flight, non stop from Newark to Singapore. The 10,371 mile flight takes 18 hours and costs $10,000 round trip.

4) 15 year old Jennifer Sharpe sold 17,300 boxes of Girl Scout cookies this year, a new record. And she sold them in Detroit no less! Hire that girl!

5) The index of leading economic indicators for April came in at +0.1%, in line with expectations. The Dow rose 41, and saw a new four month high.

6) Merrill Lynch put out a report predicting that natural gas will hit $13 due to increased demand for fertilizer and ethanol.

7) Brazil hits another new high. One good way to play this market is through the i Shares Brazil ETF, ticker symbol OWZ, which has soared from $72 to $102 since March 17.

TRADE OF THE DAY

There is a no brainer trade you can do here in the bond futures which closed today at 117, rallying from a 115 low on May 16. The June 118 calls, which expire this coming Friday, are trading at 32/64. If you sell two of these, your four day return on capital would be 1%. You would be profitable at all points up to 118.5. With the Fed having done so much to stabilize markets in the last few months, and inflation looming on the horizon, you are not going to get a 3 ?? point rally in Treasuries by Friday.

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.