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