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.