Friday, January 29, 2010

Friday 1/29/10 Commodity Ideas

Opening Note:
The newsletter is a little brief today as I have a 10 am flight, but I wanted to make sure I sent it out because I believe market direction has shifted. With the Euro/Yen chart beyond a savable level and copper convincingly violating it's trendline with over a 7 percent break over the last two days I now believe that a sizable correction has begun and is basically inevitable. Yesterday I stated to proceed with caution as the stock indexes advanced slightly higher overnight and looked possible to still have a dip buying rally. However, the indexes convincingly sold off at the open and established a low close right near the bottom of their ranges. I believe that yesterday was the last day for the bulls to save an uptrending market and that the direction of the market has now changed. We are now in a sell the rally mode and if the euro/yen chart continues to degrade like it has then another fast paced liquidation phase as the stimulus plans dry up and increasingly risky bets are made with basically free money around the world. I do not recommend owning any physical commodities anymore and would not stay long anything other than the dollar index, treasuries, or possibly the yen for any extended time. When looking for the best markets to sell I believe that the harder they came they harder they will fall. This means metals like copper, silver, and if you are really bold, palladium, will be the largest sell offs. Commodities with weak fundamental stories like crude oil, natural gas, soybeans, and wheat, where people have long said that prices are well above where the cash should be, are also good sells as speculation and fund activity has rallied them beyond a reasonable level. I would avoid physical markets with a fundamental story like grains, sugar, and the other soft's as they will be more difficult to break because of the growing season rally, that should contradict the overall market.


Buys to Watch:

Dollar Index- It has become a steady crawl upwards to new highs in the dollar, but this might have been the best/only way for the market to rally and hold it's position. The dollar becomes a run to safety as commodities and equities break and I expect volatility to the upside to increase once the big picture becomes clear to the market. Second leg up projection 8050 to 8200.

Sells to Watch:

Silver- Over the last seven days silver has been the worst performer on the planet. If you look back on January 19th the market settled at $18.80 and yesterday closed at $16.21, which is close to a 14% break over those seven days. Silver is one of the first indicators of trouble in the overall market and with continued new low closes and a strong head and shoulders projection that continues to around $14 I continue to look for rallies to sell.

Euro- The consistently worst currency continues to have a slow break, but is clearly out of consolidation and continues to post lower closes each day. Second leg projection still to 136.50.

Nasdaq- This was the strongest performer by far on the recovery of stocks...basically you could chalk it up to Apple. I said earlier that I believe the indexes should be sold on rallies and the Nasdaq proved this yesterday while closing down 39 points, significantly more than the S&P 15 point break percentage wise. Look for rallies to sell. I will have sell zones in the future as they appear.

Put on the Radar:

Copper- Huge, definitive break through it's weekly trendline this week of 325 and currently sitting at 312. It would take a miracle for the market to be saved today and this was the final indicator I was looking for to reverse before becoming a full on Yogi Bear. This is a sell the rally market now as it was one of the best performers during the recovery and a good one to watch for overall market sentiment.

Euro/Yen Cross- If you have CQG the letters are YR to get the actual traded values instead of a line chart. Looking at a weekly the current formation looks like the top of a capital building, or literally a giant bubble. Stocks mimic the euro/yen pretty accurately so I look at this as a model for what the stock market may look like soon. The chart looks like it is just starting it's downside breakout with a bit of momentum. It looks beyond savable now and I would look at this for an idea of how far the market will go.

Notes:

*I will be out of town starting this morning through Monday afternoon, so there will be no newsletter on Monday and will resume Tuesday

Thursday, January 28, 2010

Opening Note:
I have seen some market action over the last twenty four hours that has brought concern to my opinion that now is the time to sell commodities. Yesterday the Fed announced that they would keep rates steady and upgraded their view on the economy slightly. After the report came out the stock market rallied convincingly to new highs while commodities felt very little rally and in many cases closed on their lows. Furthermore, the U.S. dollar rallied to recent highs as money poured in. This reaction is contrary to the prevailing relationship action that has occurred recently as a Dollar rally leads to weaker stocks and weaker commodities, with commodities and stocks heading in similar directions. I was burned a number of times last year selling breakouts and weakness as it appearred large funds were looking for sell signals to enter into large volume long positions with more money returning to the market. With a number of markets appearing to consolidate after sell signals I would caution against becoming too opinionated right now as the Fed keeping rates low could give validation to large volume dip buying, causing a short covering rally in the short term.


Buys to watch:

Dollar Index- After the Fed announcement the dollar index rallied above 7900 and prior to the State of the Union address it surmounted a large spike rally to even higher levels that failed. The dollar has rallied out of a smaller consolidation period after it's breakout but the longer that it stays close to the breakout the easier it is to give validation to the person shorting it so proceed with caution. Second leg projection still from 8050 to 8200.

Sells to Watch:

Silver- The gold has maintained and sat below it's head and shoulders breakout for a full week now but has failed to hold new lows each time it has attempted to break. The silver has grossly underperformed the gold making it the better sell and has had less consolidation time under it's $17.00 breakout. I believe that it needs to create and hold new lows today or tomorrow for me to stay with it. Prior to the State of the Union last night a spike low formed along with gold that did not hold marking the third consecutive day that it was unable to maintain a breakout attempt. Projection still to the the low $14 range.

Euro- The Euro led gold, silver, and the dollar index on their spikes prior to the State of the Union in another failed breakout attempt. I believe the Euro must also hold new low over the next two days for me to stay with it. Second leg projection to 136.50.


Put on the Radar:

Copper- I have talked the last few days about the usefulness of copper as and indicator of market direction and to watch the 325 weekly close level. Yesterday copper was down nearly 5% at one point and closed at 322.25. I would wait for the actual weekly close, as there have been successful attempts such as last Friday to rally copper before the weekly close, but this could soon be a sell in a long covering thin market. Keep an eye on the Friday close as a sign of market sentiment.

Stock Indexes- Despite being down multiple days leading to yesterdays higher close the market range is sideways for the last three days. When money comes into the market this is usually the easiest one to push higher as there appears to be the most computer program and dip buying momentum swings. This is why these are my least favorite shorts right now because there is still a large bullish opinion out there. I am keeping an eye on these as an indicator to cover shorts because if they rally strongly they will take everything else with them.

Euro/Yen Cross- It has had a couple jiggles over the last 24 hours but continues to remain below the last 7 month range and looks to continue downwards on the weakness of the Euro in the currency sector. This is an extremely troubling indicator to a continued overall market rally because it tends to mean business with about a one month lag. The one month lag means there could be a rally left in the market buying the weakness of the first month, but this is a serious move on the chart and should be kept on the radar.


Notes:

To sum everything up, proceed with caution right now because this looks and feels a lot like the situations last year when buying came into the market to take out the shorts and swing to new highs. Because the markets in my buys and sells categories were pretty much the only ones to attempt a continued breakout validates my opinion on them as the best ones to hold a position in.

Wednesday, January 27, 2010

Wednesday 1/27/10 Commodity Ideas

Opening Note:
With the FOMC report coming this afternoon and the State of the Union Address this evening I anticipate a fairly quiet day as the markets await this news. There was some interesting action in the metal markets yesterday as silver broke over 50 cents from 7 am to 8:15, but led by a rally in gold was able to recover 58 cents by 10:30 to end up net positive after a large move. Some of this rally was due to the fact that the Feb. option contract expired at noon so the market found equilibrium in gold at the high volume $1100 level, but it was apparent while watching the action that there were large volume buy orders executed in the market as the gold was on the edge of a huge break, leading me to believe that fund money entered this market yesterday. Also, despite a positive consumer confidence reports that rallied stocks, especially the Nasdaq, the market rejected these higher prices and closed relatively flat on the day. The majority of the directional signals that I watch are tipping towards a correction in the macro market recovery and I see little news to come in the next 12 hours that will significantly tip the scale to support the market. Things will definitely become clearer tomorrow as I expect the market to continue moving directionally out of consolidation. Use caution today entering positions as the market awaits the news.

Buys to Watch:

Dollar Index- The dollar tried to peak out of the top of it's three day consolidation but was only mildly successful as earlier gains faded during the consumer confidence rally. Despite being muffled over the last week I still believe the momentum is to the upside, and barring any surprises later today the index should rally as commodities break. A second leg projection of 8050 to 8200 still exists.


Sells to Watch:

Silver- Despite the viscious rally back after it's awful open I stand by silver as my favorite sell out there right now. The head and shoulders neckline breakout sits at $17.04 today and by a close at $16.86 yesterday was set off. The price action that set it off yesterday with the loss of momentum and rally swing was not exactly what I like to see when initiating a short, but I think that with gold maintaining it's head and shoulders pattern and the strength of the silver projection alone that the market will not be able to deny a move to the low $14 range unless there is significantly bullish news.

Euro- It has been slow going down in the Euro with a large consolidation formation for the first two weeks of the month and again consolidation over the last week but I have the largest bearish case for the Euro technically and fundamentally of any currency. Looking at the chart technically I believe it is in the second leg of a three leg down move, but with a significant battle recently going lower. Fundamentally, Greece has serious lending problems and I believe that others can not be far behind. The EU is unique in that it is a collaboration of countries with vastly different histories and ideals that is trying to work together. There are restrictions on movement of labor (meaning if I can't find work in Chicago I can go to L.A., but if a worker in Spain is looking for work he has to jump some hurdles to move to Germany) and a mix of strong individual countries and a number of weak individual economies. If the Euro continues to devalue expect some dissension between the strong economies not wanting to carry the weak. Downside second leg projection to 136.50.

Put on the Radar:

Copper- Copper has historically acted as a good indicator of the stock market and also other commodities. The weekly trendline sits extremely close at 325 and the price action has been much weaker recently in relation to other commodities.

Euro/Yen Cross: Another indicator of market direction so also one to keep an eye on. The chart has broken below all of the price action since May and looks fueled to continue more with the Yen gaining strength. Dr. Doom, one of the men who predicted the stock market collapse a year and a half ago used the bottoming of this chart in February to also signal that the bottoming of stocks in March. Breaking out of the range since May is one of the reasons I believe the market is correcting as a whole.


Notes:

Soybeans and Corn: The soybean and corn markets like many others have consolidated in a smaller range over the last week despite continued bearish sentiment by many traders. There is very little fundamental news to support the price of beans where they are and I believe that they will continue to break (more than corn) but as you can see from the July - Nov bean spread refusing to break below 30 cents that there are still enough bulls that believe there will be a supply shortage at some point to support prices. I am staying out of these markets right now because I believe there are others with easier moves.

Wheat: I have heard rumors that some wheat has been imported to the U.S. because our prices are significantly inflated in relation to the world's due to ETF and other commodity fund participation. I am looking for

Tuesday, January 26, 2010

Tuesday 1/26/10 Commodity Ideas

Opening Note:
Consolidation has been the name of the game over the past three or four days in many of the markets. Grains, metals, and currencies have all sat in fairly tight ranges after volatile moves during the beginning of last week. Meanwhile, the equity indexes have had one of the more violent three day breaks we have seen since the market bottomed out in March. Looking at 15 minute charts during hours that the stock market is open you can notice that the S&P has often been able to set up a base facilitated by dip/low buying action that has usually led to uptrends and eventually higher price action. It is notable that these dip buying programs have gotten crushed over the last four days because it shows that traders are now willing to hold a short position through new daily lows, which I think marks a shift in mentality. As the markets consolidate awaiting a smaller story by the FOMC tomorrow (I do not expect they will raise rates based on fed fund contract action) and a bigger story with the State of the Union address I am keeping my ammo ready as consolidation breeds momentum. In order of interest I am watching metals, currencies, energies, and stock indexes.

Buys to Watch:

Dollar Index- Consolidation over the last three days but an upside breakout of the consolidation overnight. I am looking at this as the second leg of a rally and have a projection between 8050 and 8200.

Sugar- I do not recommend buying any physical commodities at the time being but I put this here strictly because it is the best looking one out there and could be used as a hedge against shorts. The spreads remain largely inverted and on down days it has held up the best of anything.


Sells to Watch:

Silver- Turn on the tv and you hear about the gold and people will point out the head and shoulders top that has set off on the daily chart, but under the radar silver has greatly outperformed gold to the downside over the last week. Easier to notice on a weekly chart the silver has a head and shoulders top set off below $17.00 with a projection to the low $14's. The slope of the neckline on the silver is flatter so it should provide greater momentum than gold and with less ETF fund and government participation in the market it is much easier to move. The gold to silver ratio (Gold - Silver/2 for the best chart in dollars) has moved $50 in silvers favor the last week and I expect this to continue as they fall apart.
* Huge downside move today as I was writing this so entry could be difficult but look at gold silver ratio as another entry idea

Euro- With movement overnight in the currencies after a few quiet days I still believe the Euro is the best foreign currency sell based on technicals. I am looking at the two weeks of consolidation over the beginning of the year as a flag with a projection to 136.50 on the second leg of the down move. Also notice the Euro/Yen chart (Use symbol YR on CQG with a continuous chart to see the traded values) has a downside breakout of it's range since May. You double your risk here because they are moving very contrary to each other, but I would look at selling Yen puts to fund buying Euro puts as a trade because I expect more downside on the Euro than upside on the Yen.

Put on the Radar:

Copper- I believe this will be a sell within the next two weeks as the weekly trendline sits this week at 325. Copper has been the consistent strength leader to the upside on the recovery and is one of last commodities to have a non-violated weekly uptrend. When this breaks the trend open the selling flood gates.

Bonds- They have sat in a range on the weekly chart since June building a nice looking base for a breakout. On a daily chart they also have nice uptrend with nice pullback entry positions. Keep an eye on the long side of the curve for larger breakout potential



Notes:

Potential two day pullback opportunity to sell the Nasdaq in a low volume price area that should reject higher prices between 1813 and 1820. Not my favorite sector to sell right now though.

Palladium and Platinum both have recently created ETFs involved in the markets that have accumulated large open interest positions that have rallied the markets beyond reasonable levels. It is like fighting a giant in a thin market but if the copper breaks it's uptrend there could be a furious liquidation in a thin market with big opportunity.

Monday, January 25, 2010

Monday 1/25/10 Commodity Ideas

Opening Note:
After a small rally in the macro market overnight a number of the commodity markets have begun to fall back slightly as quite a few experienced a sizeable break over the second half of last week. As we go into the month end I think a little more panic is apparent in the market psychology after downside volatility has creeped back into the picture. However, after a trailblazing rally in the U.S. dollar index the market has pretty much sat flat for the last 60 hours in relation to other supportive market's movement. As much as the macro picture may look tied together right now I am receiving signs from the different sectors relationships that are saying otherwise, as the individual sector's movement and volatility on a daily basis has been not consistent with each other.

Buys to Watch:

Dollar Index- Beginning a third day of consolidation action after it's breakout I believe that today or tomorrow is the critical point time that the market needs to show continuation. I have a pullback low volume buy zone of 7819 - 7825 that the market has already retraced to this morning so it is possible that it could rally from here. Below this level I am a little weary of buying the dollar on three consecutive rally rejections.


Sells to Watch:

Silver- After about $1.70 break over the last three days I expect some consolidation in the market, but gold continues to maintain it's head and shoulders breakout thus far which weighs on silver. A large head an shoulders formation on the weekly chart sets off below $17.00 today (surpise, surpise...look at the low thus far) and has a $3.00 projection to the low $14's. I have a low volume retracement sell zone of $17.19 to $17.28, which has been reached today already.

Heating Oil- After wavering a little I still believe heating oil is the best sell of the energies. You have had little bounce in the energies and seasonally heating oil often has more upside potential this time of year so more confused longs to wipe out as the market breaks. Approaching the Dec. 11th swing low low of 193.00 but below this it should be free to move lower. Last week's weekly close violated the upsloping weekly trendline as well.

Put on the Radar:

Euro- I'm moving this out of sells to watch because after it's breakout on Wednesday it has been one of the stronger currencies and strongest overall performers with a bit of a rally as the U.S. and German stock markets tanked later in the week. The currencies have been isolated more as a sector but both stock markets breaking and metals and energies falling apart are not supportive to the Euro. It has all the help from the outside to break but has refused it thus far. This could be a case of "The Gartman Effect" where to many people are already in frontrunning the trade with little new fuel coming into the market. Low volume pullback sell zone of 142.40 to 142.65.


Notes:

After a strong counter market rally on Friday copper maintained it's weekly upsloping trendline. As possibly the strongest consistent commodity on the recovery I continue to watch it as an indicator. I think that buying the trendline is delaying the inevitable violation that will likely happen within the next two weeks.

The Nasdaq no longer has a way to draw a non-violated upsloping trendline on it's weekly chart, no matter how you construct it. The equities had a rough tumble going into the weekend but i believe they will have one of the toughest battles of breaking as a group so attention is better focused elsewhere.

Friday, January 22, 2010

Friday Midday Update

I would use extreme caution shorting the Euro right now. For the last 36 hours it has had very little price break and has had more upside momentum on the swings than the other currencies. I would look for the next pullback zone from 142.40 to 142.65 to get short as I think it could quickly rally out of the top by taking out stops.


A lot of goofy swings as well, especially in copper today. I would be careful establishing any sort of long term postition today and would advise to take some profits before the weekend because it could get crazy going into the closes.

Friday 1/22/10 Commodity Ideas

Opening Note:
Yesterday in my opening note I stated that the sectors to watch and trade were the metals and currencies. The market threw me a little loop in that the metals were bad, yet after Obama spoke the Euro rallied almost 100 ticks to make it back to a small up day. Meanwhile the energies that I believed were in a consolidation period broke hard and equities rolled over for a second straight day. I believe that this increase in volatility and uncertainty of the leading and lagging sectors is a sign that the market is changing directions but that as much as I am uncertain of the best way to play it, the market is figuring out which way and who is leading.

Buys to Watch:

Dollar Index- I accidently left this one out yesterday. The market clearly has two closes outside of the descending wedge consolidation. However, high volatility yesterday only yielded a close on the open and as of today is sitting at the same price. The two day rally out of the consolidation was large so the market has found temporary equilibrium but this is obviously a buy and not a sell for right now.

Sugar- The market continued to display volatility yesterday but to its detriment slightly in the end. This is the best looking physical commodity chart out there so it could be a nice bet hedge against shorting others. A slight pullback this morning but I would wait for the single prints in the market profile between 2825 and 2850 to take another shot at buying it as it failed to pullback to these levels the last two days.

Sells to Watch:

Euro- The worst looking individual chart going through a brief consolidation period after a significant breakout. Still no significant pullbacks but if you are concerned with selling it you can pair it with the yen for some protection. The Euro/Yen chart is near the bottom of its range over the last nine months as it has sat in a range for most of the market rally. A breakout of this chart to the downside is more probable now that many of the previously strong markets have experienced topping action.

Silver- I wrote about the daily gold head and shoulders yesterday but looking at weekly silver chart knowing that the gold has been set off already shows another head and shoulders that I believe looks more powerful. The neckline does not slope up as much and a weekly close below 1696 today would project to the low $14 range. I really like this one!


Put on the Radar:

Energies- It appears a lot of the long covering in the heating oil in relation to the other energies could be over but the crude oil looked to be in consolidation in front of the thursday stocks report that had been pushed back a day. This is clearly a sell but I still like the metals better.


Notes:

At different times over the last three weeks I have had the Yen and Bonds on my radar to buy list. The two charts look similar but bonds clearly look like a better buy. Caution currently as bonds approach a pullback high from Dec. 18th.

The Euro chart on it's own looks the worst of all of the currencies, yet over the last 3 days the Aussie and Canadian have proportionally performed worse. I believe this can be attributed to the fact that both the Aussie and Canuck looked on the precipice of breaking out of their tops so there has been more long covering in the initial stages of the break.

If the stock indexes close poorly today heading into the weekend I would not recommend being long anything over the off days.

Thursday, January 21, 2010

Thursday 1/21/10 Commodity Ideas

Opening Note:
The currencies and the metals proved yesterday that right now they are the Tom Cruise (spotlight) of the sectors. The S&P was able to setup a base on the intraday chart around midday and closed relatively close to it's open on a day where it looked like you could have had an Armageddon down trend. Furthermore, the treasuries lack of volatility to the upside and a show of resiliency in the grains and softs make me almost want to make them invisible on my quote board. My takeaway from this action is to not get too enthusiastic about selling commodities as a whole but to have patience as a number of markets approach their weekly uptrends, but have your ammo loaded.

Buys to Watch:

Sugar- A new high close and back in open water to the upside. Even more impressive is that the new high was made on a day when the rest of the world was down. I would look at this as a whole new leg after a consolidation period for the first two weeks of the new year.

Sells to Watch:

Silver- Gold is close to setting off a gigantic head and shoulders with a neckline at $1100 today with a projection to $935, which could be a little larger than the actual move on an upsloping H+S. I had a difficult time believing the fundamentals behind the rally in the fall because reducing a large hedge position is what set it off so I have been waiting for a correction. Silver tends to be the mover in commodity breaks and the differntial chart is a bit unclear of the leader right now. However, I would use caution and look for confirmation as the pattern is blatant and a number of key trending commodities have not broken their weekly trends so it may not be ripe yet.

Euro- The market has a cinderblock attached to it's leg as it creeps downward. It had very little recovery off of it's lows yesterday and despite a small one this morning I believe that the technicals and fundamentals are too strong to save this lagger. Get in while you can on pullbacks because the 136.50 flag projection is just the second leg of the move.

Put on the Radar:

Copper- Depending on where you draw the weekly trendline from late February the trend has weekly close values of roughly 335 or 322. Pay attention to this chart because it was the indicator on the way up and a strength throughout the rally and could show the top of the equity run as well after a major loss of momentum.

Heating Oil- I'm taking this one off of my sells to watch for right now because it appears the energies may be in a week of consolidation. Keep it on the radar though for pullbacks into low volume areas, one being 205.50 to 206.


Notes:

Soybeans looked like thay could really fall apart yesterday after opening below the 955 3/4 swing low from Nov. However, they hung around fairly well and made a recovery overnight into the gap they left on the open yesterday. I they hit the gap again today I would take a shot selling them because the fundamentals say $8.00

Corn has obviously lost momentum and looks to be consolidating between $3.60 and $3.70. Time to leave this one alone for right now because it's outlook on the downside is not as bleak as beans.

You can not do any size in them but the palladium and platinum markets have been on a huge run as of late. It was brought to my attention yesterday that ETFs recently created in these markets are accumulating enormous open interest, potentially past the levels of physically mineable amounts of the commodities. This could look something like the gold and silver market rallies in 1980 when one group holds so much of the commodity that they can not liquidate.

Wednesday, January 20, 2010

Wednesday 1/20/10 Commodity Ideas

Opening Note:
I have speculated on this idea since the start of the new year but the action overnight confirms to me that the currency sector has mostly disassociated itself from the rest of the macro market. As prices maintain to droop in the commodity and equity markets a bigger shift has begun in the currencies that may not have the immediate effect on other prices that we are used to. It is more a game in the currencies now of which country's/area's monetary system and financial recovery do we buy into more. Flat out, the EU's economic system is unique in the manner that it is a collaboration of countries and as some weaken and some strengthen I smell political trouble coming with the strong ones not wanting to piggyback the laggers.

Buys to Watch:

RBOB vs. Heating Oil- Now on basically the 12th straight even to higher close it is apparent that something fundamental is happening on the chart between these two commodities. This is a semi-counter seasonal move as into winter heating oil tends to gain on the RBOB but by the action in the Heating Oil market it is clear that people are really caught long and I expect this trend to continue until the weather chasers get caught double wrong on the energy sectors break

Soymeal vs. Bean Oil- It has had a large move over the last week since the grain report but with the bean oil tied to crude and palm oil for the time being I believe the spread could go to -650 without much of a blink but look for a retracement as beans could have short term trouble breaking the November 9th low.

Dollar Index- A slingshot effect today breaking out the topside but with such a large move be cautious to see the close today. Could be A Lot of people caught short this one with the dollar down mentality still there with the buy dips.

Sells to Watch:

Heating Oil- You may have had your pullback to sell yesterday after a nice intraday recovery. I expect the H.O. to easily test the December low of 191 cents with a larger break highly possible as you can tell people are caught long by the atypical mid-month drop in O.I.

Euro- It's been on the radar for the last two weeks and it's finally in play. I think the flag 136.50 projection could be small in the bigger picture.

Put on the Radar:

Silver- The gold chart is on the precipice of looking bad and setting off a head and shoulders pattern if you really strain your eyes to see it. Silver had the bigger rally and the harder they come the harder they fall so I'm sellin silver off of gold weakness as there are less reasons to own silver in a commodity break.

Caution- I'm not enthusiastic about putting on large positions or strong ideas right now as the ground may be shifting with the currencies being the first piece to change in mentality

Notes:
Yesterday when I wrote I stated that the yen was the strength or the maintainer that I would like to sell out of the money puts on. I also later in the day and in the past weeks have said that because Australia's and Canada's economy was more resource based that I also liked them the most to sell puts on to fund other trades. This could be a game of overthinking among the currencies...why not just sell the easy out of the money calls on grains if you can get some volatility priced in?

Beans are approaching their swing low from Nov. 9th of 955 3/4...could provide temporary resistance

Based on the chart I originally believed soymeal had the stronger bear projection than bean oil, yet this has clearly been the wrong fundamental analysis. As crude prices linger above $70 other fuel choices become viable and coorellated like palm oil and bean oil. As crude has fallen sharply the bean oil has gone with it and the palm oil, leaving meal to basically make up the difference in the bean crush.

Tuesday, January 19, 2010

Tuesday 1/19/10 Commodity Ideas

Opening Notes:
Starting about mid-week last week I observed a number of markets including Copper and the Nasdaq show signs of rolling over into a bear trend. Despite going after yearly lows the markets still appeared to have the dip buying come into them characteristic of much of last year. The markets have not significantly recovered to make new highs, but the dip buying being somewhat successful adjusts my forecast for the potential of significant downside movement. People still want to own these markets and the battle to take them lower may not be swift or pretty.

Buys to Watch:


Sells to Watch:

Euro- It brokeout this morning around 4:45 am below the trendline of lows at 143.30. There was a major failure at these levels after the unemployment number on Jan. 8th on a low spike directly after the number that caught a number of shorts and swung to new highs in the consolidation area yet failed to hold them quickly. I like the timing of the downside breakout and the fact that it went through with some conviction this time instead of hanging around the levels for a number of hours. Flag projection to 136.50.

Heating Oil- Going for a seventh straight down day today as a number of longs got caught buying into the topside breakout on cold weather. You can watch the people getting screwed just in the open interest that climbed after the first of the year but has fallen sharply since the breakout failure. If you get a 2 day pullback sell it.

Grains- Just threw this up there to reiterate how bad they are and how they are the best tool to sell calls to fund other trades if you can find some vol in them

Put on the Radar:

Japanese Yen- I strictly like this for spreading right now. It often moves contrary to the other foreign currencies and does not have much downside momentum when the other currencies are experiencing it. The euro/yen chart on it's own is not a huge story altough it is definitely not a buy. But, when looking at the two indivdual outright charts it is more apparent to me that option plays or outright spread positions are viable.

Notes:

I have been interested in watching the psychology and transactions of the predator programs and other programs used day trading the markets. One of my theories on the check mark looking 15 minute charts during the day in markets like the S&P is that you have bottom picking predator programs that scare shorts out of the market by quickly buying slowing momentum on new lows causing a quick rally (check out 15 min. 7am bar for S&P today). This process happens repeatedly setting up a base and changing the psychology of the quick clicking market society and also changing indicators on these charts. When trend following and stochastic programs see these indicators they buy these bases and it becomes a go with the flow uptrend creating almost a check mark. Theory in progress though

Friday, January 15, 2010

Friday 1/15/10 Commodity Ideas

Opening Notes:
Allocations from most of the funds are done and we are approaching the half way point of January. Do the bulls continue to reign on the macro picture with the new money in the market? Until more indicators flip their signal I believe so but the momentum is slowing and a lot of money is now off the sidelines. Jim Cramer on mad money yesterday was saying buy, buy, buy because this bull rally is for real and continuing...he said a similar quote in June of '08.

Buys to Watch:

Canadian Dollar- After watching currency action yesterday and overnight with many on the precipice of big moves I believe the Canuck is the safest play and has a base for some nice momentum. Look at selling Euro calls to fund it because it is a matter of time before the fundamentals catch up to it, evidenced by this mornings tumble

Bonds and Ten Year Notes- Broken record but nice reversal base and the curve looks favored towards the long side

Sells to Watch:

Heating Oil- Clearly could not take out it's top and establishing a downtrend. Plus, my ten day weather forecast looks balmy in the upper 30's. Look for retracements if you get them.

Put on the Radar:

Gold- Small head and shoulders top forming and reached a decent recovery zone reached during the allocation so look for sell opportunities

Euro- Too many people were on it, thus the goofy reaction to unemployment...Now that they got burned be ready to jump on the mover over the next couple months. Also one of my favorites to sell calls on to fund other trades

Japanese Yen- The contrary mover to among the foreign currencies also looks on the precipice of bullishness...could be some unorthodox spreading opportunities here but need to think about it more.


Football Betting Picks:

Chargers v. Jets Over 42: Rivers leads a high powered offense that scores TD's and Revis on Vincent Jackson will only open up the door for Gates and the Chargers running game to exploit the Jets blitz. Chargers will at least score 27 points so I like the over.

Cardinals v. Saints Over 57: You saw what prime time Kurt Warner did to the 2nd ranked Green Bay D...and in turn what happened to the Cards D. The winner will score in the 40's so I take the over.

Colts v. Ravens -7 Spread Colts: They played each other in Balt. and the Colts won 17-15 but to get the win their D held the Ravens scoreless for the last 7 minutes. I expect Manning to come out with a vengeance and at -7 you get (+110) on Bodog so I like Manning to get rid of the ball and avoid the sacks

*If the Chargers point spread goes to -7 I like it a lot