Of course the big highlight of the week is the two-day Federal Open Market Committee Meeting, and we would expect most markets to be rather choppy and quiet until we hear what the Fed has to say about the economy and interest rates at the meeting's conclusion Wednesday afternoon. We are looking for no change in interest rates, but perhaps a change in the outlook for the rest of the year. Key inflation data that was reported last week, the consumer-price index and the producer-price index, both were higher than market watchers had expected. And with a 9 percent bump up in February housing starts reported this morning, market participants have been lowering the odds the Fed will cut rates in the near future at least.
As far as trading opportunities, we are bullish on metals. There has been a strengthening in the base metals and the energy markets, which makes us believe that Europe and Asian economies are strengthening and demand will increase. In addition, the June U.S. Dollar Index futures broke critical support at 83 and could face a test of 81.60, and the euro currency looks to be breaking to the upside. The U.S. dollar and metals tend to trade inversely to each other, so continued dollar weakness is likely to find metals on the rise. The recent sub-prime lending woes that hit the stock market hard also hit the dollar, and some analysts are even forecasting the dollar could slump to a two-year low against the euro.
In silver, we are recommending buying the December 16.50/18 call spread, which is currently priced at about $750, excluding commissions. Our objective is for a run up to $18 or $19 an ounce. This market has been trending up over the past week or so after a sharp decline in early March, and we see an extension higher. Currently, COMEX December silver futures are trading at $13.81.
We are also recommending the December gold 700/750 call spread for bullish-minded metals traders. December COMEX gold is currently trading at $678.90 an ounce. Spot gold had hit a six-week low of $632.30 on March 6, 2007, but like silver, has since seen a recovery.
Call us for more specifics on trading strategies to suit your particular risk tolerance, and, ask us about our special promotion to get 50 percent off commissions for your first 30 days with a new account.
Richard Ilczyszyn is a Senior Market Strategist with Lind Plus. He can be reached at 800-605-0095 or via email at rilczyszyn@lind-waldock.com.
Phillip Streible is a Senior Market Strategist with Lind Plus. He can be reached at 800-803-8037 or via email at pstreible@lind-waldock.com.
You can hear market commentary from Lind-Waldock market strategists through our weekly Lind Plus Markets on the Move webinars, as well as online seminars on other topics of interest to traders. These interactive, live webinars are free to attend. Go to www.lind-waldock.com/events to sign up. Lind-Waldock also offers other educational resources to help your learn more about futures trading, including free simulated trading. Visit www.lind-waldock.com.
Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.
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