Crude will close down about $1.50 on the day and about $6 off its highs intra week highs. The fact that prices did not break down and heavy buying came in below $70/barrel this correction may be close to over. Clients are still holding their May call spreads and are under water but we expect this trade to be profitable. We have NO opinion here until the dust settles. We have no long or short exposure in natural gas with clients. We started to buy June RBOB call spreads this week and will most likely be adding to this position in the coming weeks.

We expect to see a rally in Indices to start next week. That being said, we’re not saying to get long, but rather to use this rally to exit positions or to sell; ideally we get a window of 1105/1115 in the ES and SP to sell.

Much like 2009 we expect 2010 to be more of a traders’ market as opposed to sitting in positions for extended periods. A successful trader will need to apply fundamental research and technical research by paying attention to seasonal tendencies, examining correlations commodity to commodity, monitoring the weather and most importantly being flexible with their positions. By this I mean to perhaps scale back your position size because of the volatility, trade both futures and options, and use hedging strategies. The two principal conditions to look out for this year are who wins the argument on inflation vs. no inflation and decoupling relationships between asset classes. To keep up to speed with our ideas we encourage investors to follow in our weekly commentary or daily blog.

The substantial swings we expect to see in 2010 commodity wise will force investors to be more attentive with their portfolios. Speculators, hedgers, and producers need to recognize that with this comes excellent opportunity but much more risk. While it is unlikely that we will encounter the same type of swings this year as the previous two, one will need to bring their best game to be successful at marketing, hedging, or speculating this calendar year. The good news is that more investors are trading commodities which are quickly becoming a critical component of the global economic system and a necessary asset in your portfolio.

I heard a quote on CNBC this morning by a floor trader that I thought applied to the current investor complacency: "When fear leaves the marketplace, start being scared.” Five days in a row lower in oil, the last time we had this streak was back in the beginning of December when over 8 sessions' prices fell by 9.4%. If this pattern were similar we would see a trade down to $75.09 in February sometime next week. Past performance is not indicative of future results. My opinion is too many people are getting bearish to see a major break, but it does look like we are not done going down just yet. Natural gas ended the week mixed and failed to break out of a 40 cent range; we favor buying dips still anticipating a trade to $5/5.25.

Equities broke lower on economic news but until the 20-day moving averages give way on a closing basis we are simply trying to pick a top, which is exciting but not too wise - in the NASDAQ at 1863, S&P at 1125 and the Dow at 10480.