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.