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.