Friday, April 30, 2010

Friday 4/30/10 Commodity Ideas

Opening Note:
It is pretty clear from yesterday's rally that the risk trade is at least temporarily back on again in the market. I was watching a number of correlated low volume zones that could have provided pressure on the Equity Indexes, but every one of these zones was quickly dismantled by a sharp rally early in the day. The Energies, Grains, Silver, and Supportive Currencies all saw buying flow into the market on the European open yesterday and throughout the U.S. morning trading hours. This does not appear to be a corrective rally as I speculated in yesterday's letter, but rather a continuation higher with the FOMC keeping low borrowing rates to encourage investment. I am leaning towards the Equities rallying to new highs now with traders' buy buttons back on, but I can also see a sideways trade happening as the Equities encounter resistance at the top of their recent range. For this reason I am staying away from Equities for the time being and focusing on what I believe are some better looking patterns and charts. I have learned over the last year that you can not fight the money flow when it comes, so I have become a quickly fleeing technical bear on failed sell signals that would rather buy the flow when it is clear that it is coming. I do not recommend trying to fade this rally for right now as the Energy and Currency Sectors also have some strong components that support a rally to new highs.

Buys to Watch:

Gold- After a small break yesterday on a much higher market across the board, the Gold is one of the strengths thus far this morning as it has already made new highs on this rally leg. Because the Gold had a strong performance earlier in the week as a run to safety on the Tuesday break it was not too concerning that the Gold performed weaker yesterday as some of this trade was likely unwound. The daily head and shoulders pattern still has the same projection to $1244. Open interest continues to sharply rise in the Gold each day on the rally and Stochastics maintains a positive mode on the daily and weekly charts, supporting the rally continuation. Overnight some initial support from $1165.0 to 1168.4 provided a bottom for the market and if you are holding a position for the longer term move I believe that you can move your stop placement up to just below this $1165 level today. There is not a great entry zone on the Gold today, but a dip into the $1170 to 1171.8 range would be a decent entry point for today's trade.

Heating Oil or RBOB (Gasoline)- The head and shoulders pattern for the Heating Oil was on the radar yesterday and struggled to breakout, rejecting later in the afternoon. However, this morning the Heating Oil is broken out on it's head and shoulders pattern and the RBOB has gained on the Heat also setting off it's own. Margins for both the Heating Oil and RBOB have strengthened relative to the Crude Oil lately making them the strengths on a rally over the Crude Oil for the time being. The difference between whether you decide to execute in the Heating Oil or the RBOB is a matter of opinion more right now. The RBOB is the seasonal winner as we head into driving season, but looking at a differential chart between the two markets (RBEHOE symbol on CQG) it appears that they are mostly range bound with the RBOB near the high of this range. I personally am leaning towards execution in the Heating Oil because the open interest has risen quickly on the recent rally while the RBOBs has not and should provide better bullish momentum. For the Heating Oil the daily head and shoulders has a breakout today of 229.35 cents and a projection to 241.49. The RBOB daily head and shoulders pattern has a breakout today of 237.65 cents and a projection to 250.53. Note: Stochastics for both Heating Oil and RBOB are in overbought territory on the daily and weekly charts. This is not as alarming an indicator though as they have spent a considerable amount of time in this area throughout the recovery year.

Australian Dollar- The Aussie Dollar was in the Notes section yesterday as it was nearing the breakout on it's continuation wedge pattern. After rejecting the breakout yesterday afternoon the Aussie has convincingly broken out this morning above the .9234 level today providing a projection to .9471. Daily Stochastics provided a buy signal for the Australian Dollar yesterday that will likely be confirmed today barring a significant reversal and the weekly chart has a head and shoulders pattern that projects to .9850 further supporting the rally technically. A break into the .9241 - .9251 range would provide a good area for long entry with the option of a stop below the support to .9229 or the low for the day of .9225. The Australian Dollar has acted as the strength among the foreign Currencies on the recovery rally along with the Canadian Dollar. Because Australia has an economy fundamentally supported by Commodities I take a confirmation on the breakout of the Aussie as and indication of further support to Commodity and Equity prices.

Sells to Watch:

Copper- With a close near the current price level today the weekly Stochastics indicator for Copper will provide a strong sell signal as it has faded out of overbought territory. I have written about it the last two days, but with open interest barely falling a couple thousand contracts this week and over 25,000 (over 17% of market) open long positions that are net losers below $3.29 the Copper still is primed for a large long position sell off. It is a little disconcerting that the market has continued to find support in the low to mid $3.30's and could be building some bullish recovery momentum here. As the "risk trade" has rallied the broad class of supportive markets though the Copper has seriously lagged behind its correlated counterparts. I am still waiting for a breakout below the $3.29 lows from march or a rally into the low volume sell zone from $3.3870 to 3.4490 to execute a short position for the potential domino effect to lower prices. Stops will likely be triggered on liquidation below this $3.29 and I believe that the a test of the $2.8290 low from February is likely.

Put on the Radar:

Notes:

Cotton- Cotton rejected the daily and weekly breakout yesterday with a break below 84.24. After breaking out a week and a half ago the Cotton was unable to sustain any significant rally and had a number of failed rally spikes. I became sour on the trade a few days ago after the second rally failure attempt and hopefully gave enough warning to cut some losses and sell out long positions. I am unclear on the market direction going forward, so I recommend a flat position if you are still holding longs.

Thursday, April 29, 2010

Thursday 4/29/10 Commodity Ideas

Opening Note:
The Fed announcement came and went without much market reaction yesterday as rates were kept steady as expected. While The Fed did upgrade some language on economic growth they did add some more ambiguous language highlighting more possibility of rate hikes in the future. The FOMC's hands were pretty much tied during this meeting as European debt downgrades and the potential financial reform bill have recently pressured the market making it it difficult for them to augment their wording much without possibly adding to the bearish market movement. With the nearly free money policy extended for at least another month, without a hint of when it will end, it is crucial to watch money flow for the end of this week and the beginning of May next week to see if investors are still willing to play the risk trade with conviction. Taking prices higher has chiefly been due to investment this year, but as prices have sagged over the last month in Commodities and Equities new participation in the market has waned. There has been buying of Equities and supportive Commodities and foreign Currencies since the European open overnight as part of a corrective rally after Monday's rally failure and Tuesday's significant break. However, these rallies must continue with follow through to new highs for me to change my current stance that rallies are better sold than followed. The recent dip in prices has only kept open interest steady if not higher in a number of weaker Commodities for this month, meaning that there are a number of people sitting with net losing positions currently. Thus far I believe that the rally today could provide some good opportunities to sell as it appears to be mostly corrective rather than due to strength.

Buys to Watch:

Gold- The recent Gold rally has been fueled by a run to safety trade as it is being used as a substitute for weaker European Currencies and protection on falling Equity and Commodity prices, so it is not curious that it is one of the only markets slightly lower today on a higher board. Open Interest rose substantially again yesterday while both the daily and weekly Stochastics indicators remain in a positive mode providing further evidence on the daily head and shoulder projection to $1244. Overnight the initial support point of $1164.7 provided a bottom for the market, but if prices were to dip below the weaker support from $1161 to 1162 they would likely settle in the lower volume area from $1157.2 to 1160.4. This lower volume area provides a good long entry point for today and is also a good spot to place stops below if you are looking for the larger move to new highs. Yesterday was a new contract high close for June Gold since early December of '09 indicating continued strength in the market.

Sells to Watch:

Copper- Like Gold, Copper is one of the only other Commodities that is lower on my board this morning as I am writing. In the newsletter yesterday and mid-morning update I noted that open interest has risen significantly since the beginning of March, but with a more steady level over the last few weeks. However, with the 16 cent drop in prices on Tuesday and very little recovery since, Copper is sitting dangerously close to the March low of $3.2900. This low was traded exactly twice in March making it a little more distinct as a bottom. Although there was a minuscule drop of just over 2,000 contracts since the beginning of the week, if prices were to fall below this support level there would still be over 27,000 contracts outstanding (nearly 18% of the market) with a net losing position since March. I believe that a domino effect could occur below this level as longs sell out of their positions and in a thinner market this could have drastic consequences that could easily lead to a test of the base from February 5th of $2.8290. The low volume sell zone above the market from 3.3870 to 3.4490 was rallied into on the lower portion, but did not provide a great time frame for execution. If the market were to rally back into this zone I would not hesitate on selling, but if not then a confirmation of prices below $3.29 would provide good entry on the breakout. While the daily Stochastics has slowly moved negative over the month of April and is sitting near oversold territory the weekly Stochastics is very near providing a sell signal in overbought territory after hanging there for most of the last year.

Put on the Radar:

Stock Index Resistance and Possible Sale- Throughout the past year's recovery the Nasdaq has been the clear strength of the Equity Indexes, but has become troubling as the weakest performer over this week. The S&P 500 does have some room to catch up to the Nasdaq and Dow as it has acted weaker after the release of the Goldman suit and has acted slightly stronger over the last 48 hours on the Tuesday tumble recovery. I have low volume zones as a point of reversal and sale execution that correlate in all of the Equity Indexes from Tuesday's bearish acceleration, but as of this morning only the S&P has decisively entered it's own. The level for the markets are S&P 500: 1195.00 - 1200.50, Nasdaq: 2024.75 - 2035.25, Dow: 11059 - 11116, for all the June futures contracts. As it has performed the weakest recently I believe that the Nasdaq is the best sale of the bunch, but I would rely on the S&P resistance zone as an indicator, as if the S&P were to rally above it's zone the probability of the Nasdaq holding it's own zone would diminish. Use these levels for longer term low risk sales this morning or just as an indicator for market direction on a failure at these prices or a rally above them.

Heating Oil- Despite Crude Oil playing dangerously close to the $80 level that could liquidate long positions below it, the Energies have rebounded nicely over the last 24 hours with Heating Oil being the clear leader of the sector. On CQG if you enter symbol HOECLE you can see the Heating Oil vs. Crude Oil Crack spread that has completely exploded lately causing the Heat to be the strength. The Heating Oil has a head and shoulders pattern on it's daily chart with a breakout value today of 229.25 and a projection to 241.39 cents. Open interest has risen with strength in the Heat lately and has continued to increase in Crude over the last few months. This is a good potential buy on the breakout, but beware of the recent two point downtrend in Crude Oil that has a value of $84.93 today and resistance in Crude from 85.02 to 85.45 that could stall or reject a breakout.

Notes:

Euro Currency- The Euro is about as resilient as they come right now as it repeatedly refuses to hold lower prices while testing the previous old low close of 1.3266. This old close still acts a psychological resistance, but there is a lower volume range that continues to 1.3285 and has acted as a more accurate top for the market today. The Euro's third leg down still has a projection range from 1.2750 to 1.28, but as the market is very news driven and has some intervention support I am still holding off on executing a short until a move lower is more confirmed.

Australian Dollar- The strength of the Currency sector along with the Canadian on the recession recovery has a continuation wedge top on it's daily chart with at least three points on the topside trend. The breakout value is sitting at .9260 today and provides a rally projection to .9471. As Australia is a resource and Commodity based economy this breakout could indicate continued strength in Equities and Commodities over the short term.

Wednesday, April 28, 2010

Wednesday 4/28/10 Commodity Ideas

Opening Note:
The downgrade of Greek debt sent the markets tumbling yesterday as investors flocked from riskier Commodity and Equity assets. The public filleting of Goldman Sachs also did not help any rally's cause as it is clear that the new bank regulation bill is a priority for the government and not short term bullish the market. This afternoon the FOMC makes their announcement and I believe will keep the similar stance of extremely low rates for an extended period of time. Overnight a number of Commodities and Equities markets were weaker on the European open, but have rallied back in a strong way. The Equity Indexes and Crude Oil may not show much of a change for the day on the board, but the Nasdaq is already sitting near the highs of it's already large 20 point range and Crude near the highs on it's $1.50 range. The market has correctly anticipated most of the large announcements this year, like the FOMC and Unemployment Rates, and this strong rally since 4 a.m. tells me that there are a number of bets being placed on The Fed keeping the same wording. The exodus from the risk trade has convincingly reversed this morning as nearly every supportive Commodity is at least slightly higher while Fixed Incomes, Yen, and Dollar futures are significantly off their highs overnight. If the "low interest rate/nearly free money" policy is renewed another month there should be a battle between the bullish investment money and the European contagion and other fundamental bears for the month of May. I am still sticking with my opinion that we will see the markets continue on their extended rally as Bears tire of markets that refuse to significantly break and the overwhelming money flow drives the market. Note: Carrying positions through the FOMC announcement is extremely risky and I recommend a flat approach as there could always be a curve ball. Take this into account when looking at entry on trades today as the prospects of a large move are reduced during U.S. trading hours.

Buys to Watch:

Gold- Gold appears to be in a win-win situation right now as it is the "Go To" Commodity for safety on a macro market break like yesterday, but also finds some support when the market is higher. Despite options expiration yesterday the market was able to rally nearly $20 towards the end of the day after entering the low volume reversal zone from $1144 - $1152 that I noted for long entry yesterday on a "run to safety" trade. Although the market has given back much of it's late gains from yesterday as the risk trade has reversed I still believe that Gold is a strong buy on in the midst of it's head and shoulders pattern that projects to $1244. Open Interest in Gold rose over 21,000 contracts, or over 4%, yesterday and with a recent buy signal on the daily Stochastics and a positive mode for the weekly indicator has plenty of fuel to continue. The Gold to Silver ratio (Gold - Silver/2) staged a decisive reversal on the Gold rally yesterday and Silver weakness that should continue to see continued gains in Gold's favor as well. For today's market I have an initial support level from $1161 - 1163 that has provided the lows for the market thus far today, but also have another lower volume zone from 1157.4 to 1160.4 below this level with more initial support from 1153.4 to 1156.8 for a good level for long re-entry or establishing a larger position. If you are looking at holding the trade long term on the larger move I recommend using a stop below the lower support level for today.

Sells to Watch:

Copper- Copper snuck by yesterday as the absolute worst thing on my board after closing over 16 cents lower on the day. I need to double check the number, but right now I am actually showing an increase in open interest on the break from yesterday? All I know is that if the price breaks below $3.2900 every single long that has bought Copper since the beginning of March will be a net loser, with this being nearly 25% of all outstanding positions! This has massive long covering break written all over it. I have a large low volume zone from acceleration yesterday from 3.3870 to 3.4490, but I recommend waiting for the upper end of this range on short initiation today. Copper has performed the weakest over the last month in the Metal sector and is reversing as one of the strengths during the recovery to one of the current weaknesses. If this long covering break occurs it is a fairly ominous sign for Equity rally continuation as the Copper is often a leading indicator for the market. I find it a little odd as well that I heard a great deal about Copper's strength as an indication of continuation on earlier rallies, but have heard not even a peep about it's weakness lately....hmmm.

Put on the Radar:

Euro Currency- The Euro convincingly closed below the previous low close of 1.3266 in the consolidation range indicating the beginning of continuation lower on a it's third leg down. I have a projection range for this third leg down in the Euro from 1.2750 to 1.28. However, the Euro has acted stronger this morning, rallying over a full point off of it's base on a trending rally after the European open, so I am still hesitant to place it in the sell column for right now. The market has psychological resistance at this 1.3266 level as it failed on an afternoon rally around this level yesterday, but does not have a great low volume resistance level until stronger resistance near 1.3285 from yesterday's trade. I am holding off on looking for short entry on the Euro until it is more clear that there is further continuation on the leg down.

Cotton- Cotton has had a nice rally this morning on it's open, but continues to sit in a consolidation range above it's breakout from last week. This could be a holding pattern for building momentum, but I am becoming concerned with continuing to stay long. I recommend reducing a long position in Cotton for the time being if not completely exiting. If you wish to stay long the market at least a little then I still believe longer date options are the best tool. The daily cup and handle pattern still has a projection to 89.08 and the weekly new leg up to 95 cents, but I would definitely need to see a new high close by Thursday to stick with the trade.

Notes:

Soy Meal and Soybeans- The Grain sector tumbled with the rest of the market yesterday on the Greek debt downgrade rendering my low volume entry points all but obsolete on the break right through them. With Corn and Wheat beginning to reverse lower I am removing any buy suggestions for the Soybean Complex for right now. Both the Meal and Bean markets have confirmed sell signals on their daily Stochastics in overbought territory and the November Beans reached their initial breakout projection indicating that the market needs a corrective break before further advance. I still have a projection to $307.5 for the July Meal on the head and shoulders pattern and with Bean Oil still vulnerable relative to the Meal I will be looking for long entry opportunities on the Meal as we go forward.

British Pound- The Pound is like the slightly better looking ugly step-sister to the Euro right now, meaning I'm still not buying it. The market toyed with the cup and handle breakout of 1.5186 overnight that has a projection to 1.4874, but has since recovered. Like the Euro, the Pound slings around on the mood, rumors, and government intervention of the day, so it is a tricky trade and I would have to wait for strong confirmation on the move to execute the sale.

Tuesday, April 27, 2010

Tuesday 4/27/10 Commodity Ideas

Opening Note:
A strong weekly close on Friday was followed yesterday by very quiet markets that had low volatility and seemed to just sag lower throughout the day. It appears that the inflow of money is taking a temporary break as the FOMC meeting today and announcement tomorrow take center stage for the markets. No more than a week and a half ago Bernacke repeated the "Extremely low, Extended period of time" keywords in a speech and based on the continued rise in open interest and prices across the market I assume that the majority of the market is expecting The Fed to keep the same stance on their rate and economic policy. The Fed does not appear to be in the business of shocking the market right now, and if they were to suddenly change policy without warning I would expect a huge windfall of long positions, so I believe that after the announcement Wednesday that we will be back in the game of take Commodities and Equities higher for the month of May. Although there is the Consumer Confidence number at 9 a.m. today, I would lower expectations on the market adding positions until after Wednesday and lower long exposure for the time being, as basically the entire market is lower already this morning and could continue to creep downward as the market reduces exposure.

Buys to Watch:

Gold- The large head and shoulders pattern is still intact on the daily chart that has a projection to $1244 with a neckline of $1129 today. Open interest continues to rise in the Gold, even on a day lower like yesterday, and much more so than in any of the other metal markets. Stochastics now has a confirmed buy signal on the daily chart from two days ago, but after yesterday's slight break does not look as strong as it potentially did the day prior. I have a good low volume "single print" zone for long entry on my market profile from $1144.5 to $1152.2 with some stronger initial support below from $1140 to $1143. On a note of caution though, options expiration is today for the May Gold and high volume traded prices like $1150 tend to act like a magnet for prices near expiration. With the FOMC announcement tomorrow as well I only recommend putting on a small initial position on the lower end of the zone if prices trade there today or tomorrow, as the rally potential is diminished until Thursday, and holding a position through the FOMC announcement is very risky.

Sells to Watch:

Put on the Radar:

Japanese Yen- The Yen has set off a bearish cup and handle pattern on it's weekly chart with a breakout level of 106.79 and a projection to 100.12. As the Yen is tied to the U.S. interest rate market on an exchange rate investment trade the market has shown topping action much like the Fixed Incomes have. The monthly Yen chart uptrend of the past two and a half years was negated last month and Stochastics for the monthly, weekly, and daily charts all remain in a negative mode as well. The low volume resistance zone for short entry sits from 106.55 to 106.81 with stronger initial resistance above this from 107.02 to 107.16. This has provided the highs for the day thus far, but like I stated earlier, I do not like the Yen as a sell right now if it holds a rally above the 107.16 level for any extended time frame. Note of caution: The FOMC announcement is tomorrow and holding positions through the announcement is risky. If The Fed uses the same language as it has this could have a slight rally effect on the Yen, but like the Fixed Income markets it has continued to weaken and have less of a rally effect for the market each time the Fed has taken the same stance.

Buy Stock Indexes- The S&P 500 negated the breakout on it's continuation triangle with a lower close yesterday afternoon, but the Dow still remains broken out as the strength of the sector over the last two days on it's similar pattern. Like I stated in the opening note, I believe that prices could continue to weigh lower across the market for the next day and a half as some longs are covered prior to the FOMC announcement. The Dow however still is maintaining prices above the 11,098 breakout level today for the June futures and still has a projection to 11,278. The S&P, which I recommended as a buy yesterday negated the 1209 breakout and has traded back into the triangle formation with boundaries of 1192.75 and 1208.5 today. I am holding off on purchasing any Equities until after the FOMC for now, but keep them on your radar as they should continue to perform strong if The Fed renews it's policy for another month.

July Soy Meal and Soybeans- Both markets have basically negated their daily uptrends over the last two weeks unless they close drastically higher today. Stochastics for each market has also produced a sell signal in overbought territory as the rally continuation higher has stalled. I recommend reducing long exposure in these markets for right now as they need a break in prices prior to continuation higher. However, I do have good support zones on my market profile just below the markets this morning that could provide good risk/reward on long entry on the two day pullback. The Soybeans have a low volume zone from $9.98 1/4 to 10.01 1/2 with initial support to 9.96 and the Meal has a low volume zone that correlates to the Beans from $288.2 to 290.5 with initial support to 286.7. I still prefer buying the Soy Meal over the Soybeans for the time being as the projection in the Meal to $307.5 on the daily head and shoulders still stands with higher potential than the Soybeans. Also note that these trades are on the radar because they have a compelling setup for entry, but the overall trend and momentum has potentially turned negative for the markets, so take this into consideration when determining size and risk on the trades.

Notes:

Cotton- I can not say that the chart looks terrible since the breakout on the daily and weekly rally patterns, but I also can not say that it looks great as of right now either. Because of this I recommend reducing your long exposure for the time being, while also maintaining my opinion that options are the best way to play the market on the potential rally. Cotton has stalled out twice on the rally higher with two spike failure days in the last week. The daily cup and handle projection to 89.08 and weekly new leg higher projection to the 95 cent level both are still intact with prices maintaining above the previous consolidation ranges high trade of 84.24 cents. However, I still do not have a great area for long entry or support and believe that upward momentum has been greatly reduced.

Monday, April 26, 2010

Monday 4/26/10 Commodity Ideas

Opening Note:
Friday was another strong day for the macro market as gains in Gold and Crude Oil led the way for Commodities while Equities again finished higher, definitively rallying above their range of the last week and a half. It appears to me that whatever break and sideways range we have had in the market since the start of April is about all that the market will yield to the downside for right now as we move forward to around Day 60 of the early February rally without a significant pullback. Although it is difficult to continue buying the unprecedented rally on even higher continuation I believe that this is the best approach for Commodities and Equities for right now. My fundamental opinion that the stock market, and Commodities for that matter, are priced higher than they are actually worth has changed little and I still believe that the market is creating a "bubble" effect where out of control investment buying is extending the market past equilibrium and setting up a potentially nasty correction later in the year. However, I have seen enough examples of this over-enthused market psychology and I believe that we are now just entering the acceleration mode on the rally. With the government continuing to back nearly free money and pumping stimulus into the economy money continues to be thrown at nearly every investment market regardless of fundamental or technical concerns. With markets like Crude refusing to break significantly, despite technical and fundamental signals that pointed towards a correction near $75, and higher projections in Gold and Equities I believe that the strongest rally portion of the recovery is coming over the next couple months as shorts are continually squeezed out of the market each time they enter. While I recommend playing the long side of the market over the next couple months it is important to keep in mind the underlying reality that credit is still not being lent, the consumer still is spending less income, and employers are not hiring at a rate fast enough to eat into the Unemployment Rate significantly. Ride the coming rally wave, but keep in mind the strong prospects that this rally is led by stimulus that will end soon enough, and that when this stimulus ends we will likely find ourselves in an over-priced market with the strong potential for more than just a 10% correction.

Buys to Watch:

Gold- Despite the break on the Goldman news and concern that the Paulson Gold fund may be force to liquidate Gold was able to keep it's large head and shoulders pattern on the daily chart intact and appears to have built some bullish momentum in the process. The daily head and shoulders has a neckline from the highs on Jan. 11th to Mar. 3rd that provides a value of $1129.1 today and an original projection of $1244.1 still. The break in Gold over the last week was rather weak overall with numerous attempts to close below the neckline failing as open interest and buying continued to flow into the market on any dip. Now Stochastics is nearing a buy signal on the daily chart and RSI has reversed to a positive mode as Gold looks to rally on the large projection. I have a low volume zone from $1144.6 to $1152 from the acceleration rally on Friday that has stronger support from $1140 to $1143 for entry into the market on a break.

S&P 500- Although the S&P was hit the hardest of the Equity Indexes on the Goldman news it has recovered nicely and now is broken out on a continuation triangle on the daily chart. The breakout value on Friday was 1209 and yields a projection to roughly 1232. I was looking at possibly executing this pattern in the stronger Nasdaq Composite, but believe that sticking with the S&P in this situation might be more beneficial as it may have some room to catch up after the bearish news.

Cotton- This is one of the old Turtle/Donchian Trend System trades, where you purchase the new 20 or 55 day high close on the prospects of a continuation breakout. Money piled into the market early last week on this trade, but prices failed temporarily as the market was not able to extend. However, the cup and handle daily pattern and new weekly leg up have held and still provide projections to 89.08 and 95 cents respectively. Cotton can be extremely volatile and thin at times, so I recommend using options for long entry to capture the move. Although I do not see a definitive long entry point I would look for a pullback to the moderate support around the 86.00 to 86.25 cent level for entry on an initial long position in the options.

July Soybean Meal- Soy Meal continues to chug away on it's daily head and shoulders pattern towards the $307.5 projection. The Meal chart continues to be the strongest among the Grain sector, although the July Beans and Wheat are also enticing, as Meal was able to bounce off of its daily trendline Friday of 290.9 and reverse higher overnight. Today the daily trend value sits at $292.9 as support and lacking a great entry point today I would use this level as long entry support. Stochastics and RSI continue to flirt with their overbought zones, potentially signalling that the Meal market may need a rest, but I still recommend this as buy while the trend continues and July Soybeans gain some steam. I also still have a cup and handle pattern projection on the Oil Share (Bean Oil - Soy Meal, with 5 to 3 execution for equal tick size) that has a projection to 825 below the 1121 breakout.

Sells to Watch:


Put on the Radar:

Japanese Yen- As we head towards the time period where interest rates will eventually unlock the Japanese Yen is showing signs that the market is beginning to position itself for this occurrence. With a looser tie to interest rates on the borrow and reinvest abroad carry trade the Yen is beginning to weaken. The monthly uptrend in the Yen from the base in the summer of '07 was negated last month and the weekly chart has now re-initiated a cup and handle pattern below the breakout of 106.79 that has a projection to 100.12. I have had the Yen on my radar for about a month now and repeatedly noted the large low volume gap from 109.18 to 110.34 for initial entry on a short position, but this low volume zone was only entered for a brief time frame before falling away. The Yen has another important characteristic that provides more value to it than the interest rate markets in that it has what appears to be an artificial top around the 114 to 115 level as the government has repeatedly intervened to deflate it's currency and keep export prices reasonable globally. Because of this gap I believe that you can sell far out December Calls around the 114 and 115 levels with more reasonable expectations that the market will not support rates at this level. For shorter term entry I am looking at the low volume zone from 106.56 to 106.80 with stronger initial resistance from 107.02 to 107.16 on short entry. Because this is a weekly chart trade that has some support on the previous lows to muscle through I recommend looking at some longer term options plays on the downside move.

Buy Bonds vs. Sell Five Year Notes- This is a very similar trade to the Japanese Yen in that it is positioning for higher rates and the unwinding of the long shorter term yields versus short longer term yields spread from '07. To chart enter (Bonds*3 - Fives*7) , with the same execution contract values. This portion of the Yield Curve has built up a large base over the last 5 months and is now on the verge of setting off a large head and shoulders pattern on the daily chart with a neckline value of -452.145 from the Dec. 31st to Mar. 19th highs and a projection to roughly -444.00. Like the Yen, I have noted in the past the gap on this chart from -457.29 to -457.19, but it was only briefly filled non-coincidentally on the day before the Yen reached it's low volume zone. Although the chart has been very strong since entering this gap early on April 16th I recommend waiting for the breakout before entry.

Notes:

Cocoa- Cocoa just reached it's daily cup and handle projection of $3231 this morning and it is now time to take profits on the trade. Over a nearly painless 4 days Cocoa has rallied nearly 200 ticks and over 6% overall on the pattern with only some slight intraday pullbacks on the uptrend.

Natural Gas- The Natural Gas market tends to get very thin and volatile recently, so I am hesitant about placing it in the buys, but the daily chart now has a base cup and handle pattern. The breakout on the pattern is 4.269 and has a projection to 4.659. Friday's close was just below this breakout level, so the pattern is not technically in play until a higher close is potentially made today. On a lower risk shot on the a break prior to the potential breakout though there is a low volume zone from 4.208 to 4.238 if the market trades there today. Daily Stochastics has produced a buy signal in Natural Gas and open interest has begun to decline in the market showing a drop in the large number of shorts that have invaded the fundamentally weak market. This is again a do at your own risk trade though as I am less certain about the continuation prospects.

Friday, April 23, 2010

Friday 4/23/10 Commodity Ideas

Opening Note:
After opening much weaker yesterday morning the macro market staged an incredible recovery with Equities and Energies finding a way to close higher on the day. This was one of the strongest reversals of any during the recovery period of the last two and a half months as a 15 minute chart trend was formed around 9 a.m. and slowly rallied it's way back to the highs on the day. While pretty much every bone in my body was telling me to sell Crude Oil on it's technical weakness prior to yesterday I am left perplexed today. The markets appear to be in a state of sideways volatility right now as markets that appear tired of the bullish run and show weakness are battling with new allocation money that continues to buy new lows with strength whenever the market is on the verge of larger weakness. I know that I am not alone when I say that holding anything longer than 24 hours right now is iffy at best right now and I believe that this mentality among position traders is leading into these strong reversals that seem to pop up everyday in some market. Equities are now sitting just off their highs and are positioned to continue their rally, as they tend to clear out any shorts each time they enter the market, still making them the strongest sector and the best buy. I am leaving Energies off of my "tradeable" markets list for right now until the market conditions change to make them less volatile with more direction.

Buys to Watch:

July Soybean Meal- The breakout on the head and shoulders pattern has not had a down day since initiation as the market has built a strong base trend higher toward the $307.5 projection. The base trend today has a value of $290.9, which should provide support for the market. The low volume zone that I was waiting for on initiation from 288.2 and 290.5 was only barely ticked into on overnight trade and was not pulled into yesterday. This zone is below the trend value today, so I am using the larger profile support from 290.4 to 293 as a base on entry in the low volume traded area from 294 to 294.2 as a smaller risk trade. If the uptrend on the Meal is rejected I would take a flat position in the market for the time being, but still watch the lower volume zone from the 288.2 to 290.5 range for indication on support at this level to buy or if there will be continuation lower. Note of Caution: Both Stochastics and RSI are now in overbought territory on the daily chart indicating that momentum higher may be waning as a pullback may be necessary soon.

Cotton- I have come to the conclusion that the best way to play the Cotton rally is by using options as a violent two day pullback wiped out a number of longs, but still held the market's bullish breakout. Although the market came close to rejecting the pattern yesterday, the bullish breakout on the daily chart above 84.24 has a projection to 89.08 and the weekly continuation pattern has a new leg projection off of a flag pattern to the 95 cent level. The market recovered later in the day yesterday after the break and is strong again this morning as longs have entered on the open. The market likely needed this break in momentum prior to continuation, but I now recommend looking at longer date options to capture both the daily and weekly projections.

Cocoa- Cocoa is entering the home stretch on it's bullish daily chart projection on the cup and handle pattern of $3231. The market has continued to climb higher each day on the upwards trending rally. Overnight the market entered the low volume zone from 3101 to 3131 and rallied above it. There is a smaller base of higher volume traded support from 3133 to 3143 and as the market is nearing it's projection I recommend moving your stop to just below the 3133 level to give the market room to continue, but to not allow profits to escape. A re-entry into the low volume zone does not provide as much support the second time, so I would exit near the top and ring the cash register if it trades into this area.

Sells to Watch:

Put on the Radar:

S&P 500 Triangle- The S&P has been weighed down in comparison to the Nasdaq on the Goldman Sachs news and has failed to make new highs yet over the last week. There is a small triangle that has formed on the daily chart over the last 7 days of trade that has a topside breakout value of 1209.00 today and a base of 1188.50. Above the 1209.50 swing the market projects to 1232.25 on the continuation pattern, but a close below the base would signify a top. With the Nasdaq already climbing to new highs I believe that the prospects of bullish continuation are stronger on the triangle.


Notes:

Ten Year Note- The Ten Year Note rejected it's bullish daily trend with a close below the daily value yesterday. Further weakness this morning has set off a smaller double top pattern on the daily chart with a breakout already established below the 116.185 level that has a projection to 115.235. The fixed income market has acted non-decisive as of late and I believe is a better sale on the prospects of higher interest rates going forward.

Euro Currency- In what could be another case of the protection game against another leg down, the Euro traded below the previous low trade of 1.3266, but staged an impressive recovery into this morning thus far. A close below the previous low trade would likely mean continuation on a new leg down for the Euro with a projection from 1.2750 to 1.28. I know during the previous low two weeks ago that foreign entities stepped in to purchase Euro around this level, so it is likely that there will be another battle here today as a protection attempt is made.

Thursday, April 22, 2010

Thursday 4/22/10 Commodity Ideas

Opening Note:
With the S&P 500 and Dow Equity Indexes failing to at least trade above their previous highs on a 2 day pullback attempt for the first time since the rally began in early February the macro market experienced a bit of weakness towards the end of the day that has carried over into this morning. Much of the bullish earnings data over the last week has been overshadowed by the Goldman civil case and now a number of poor earnings reports are beginning to drag the vulnerable market lower. Increased volatility over the last week is another technical indicator for a market reversal as the S&P looks to possibly be forming the strongest double top formation of any of the indexes. While the Grains, Softs, and Fixed Income sectors have a number of individually bullish markets right now the rest of the market sectors with higher correlation to Equities are also looking like better sales. With Copper leading the way down the Metals look very top heavy as the overall lagging sector on the rally of over 50 days. Energies have also looked weak for the last two weeks and have trended lower despite the inflow of new longs into the market. Finally, the Euro continues to trend lower as well and is nearing it's previous lows. Although the strength of the correlation between the Euro and the overall market is weaker than normal, a break below the consolidation on a new leg down should also drag the U.S. market with it. I recommend looking to sell rallies in the supportive macro sectors for the time being and to focus on the individual strengths like Soy Meal in the markets that grow as buys on dips.


Buys to Watch:

July Soybean Meal- With the large daily head and shoulders pattern still strong with a projection to $307.5 the Meal remains the best buy in the Grain sector. Open interest continues to pour into the Meal despite a slight drop in the Soybeans over the last week and maintains a positive mode on the momentum indicators. Although November Soybeans reached their initial projection range yesterday before the close I still believe that the Meal is a good buy against the strong uptrend on it's daily chart. With the outright Soybeans reaching their projection one might wonder where the rest of the move in the Meal is going to come from, but it appears that the answer is the Oil Share (Bean Oil - Soy Meal). The Oil Share has a cup and handle top formation with a breakout of 1121 and a projection to 825 with roughly another 200 ticks of move left on the downside. This is a good trade on it's own as a sale on rallies (5 Oil vs. 3 Meal for execution) and contains some of the juice that should further propel the Meal. There is a low volume traded support zone for long entry in the Meal from $288.2 to 290.5 that was left from the acceleration on yesterday's open that was barely ticked into overnight. The uptrend on the daily chart rally has a value of $278.9 today that also supports long entry on a break into this zone.


Sells to Watch:


Put on the Radar:

Cotton- Cotton is still broken out on the strong daily cup and handle and weekly flag patterns that have projections of 89.08 and 95 cents respectively. The market had extreme volatility yesterday on the huge opening rally and subsequent break throughout the day, but still look like a good longer term buy on these trades. I do not have a great entry point on the market right now, but the 85 cent level seems to have provided good support near the daily breakout and should now be looked at as support. With Cotton being very thin at times I recommend taking chunks out of the trade when you have a good rally like the one from yesterday's open or playing the longer term rally with longer term out of the money calls.

Cocoa- Cocoa seems to be in a grind higher mode for the time being on it's cup and handle pattern with a strong technical base. Like the Cotton I do not have a good long entry zone for the time being, but trade near the breakout level of $3033 on yesterdays open should provide support and be a good base to buy off of on a pullback. With daily and weekly Stochastics still providing a positive mode for momentum the market is still a buy on the pattern projection to $3231.


Notes:

November Soybeans- November Soybeans reached their initial projection range from $9.86 to $9.92 1/2 yesterday with a high trade of $9.87. The Soybeans still have a strong uptrend, but momentum indicator are becoming tired in overbought territory and open interest growth is slowing in the Beans. While the uptrend is intact I still recommend playing Soybeans from the buy side, but reducing your expectations on rally continuation higher. To create a trendline with a tighter fit I am drawing from the low trade on March 31 st to the low trade on April 15th that has a value of $9.59 1/4 today. I am waiting for a pullback to support from 9.63 to 9.65 as a base for the trade.

Ten Year Note- Although the rally from early April has been slow and unconvincing in my opinion the Ten Year still has a strong uptrend that has facilitated long entry. Today the trend base has a value of 116.275. I have a difficult time recommending a buy on the market right now, but the daily head and shoulders has a projection to 117.235 as a spot to take profits against as the value approaches if you are long.

Wednesday, April 21, 2010

Wednesday 4/21/10 Commodity Ideas

Opening Note:
With Equities driving the way yesterday the macro market again had another day higher as strong reversals in supportive Currencies and Commodities like the Canadian Dollar and Crude Oil continued higher after looking poor two days ago. Equities were the clear strength again and were followed by Crude Oil for the most part, but after a strong morning the Metals notably lagged behind the rest of the pack after failing to rally once they reached their low volume traded areas simultaneously as a sector. While Energies and Metals are now sales on rallies the Grain sector is beginning to heat up and should now be played from the buy side as big money is looking at the sector as cheap relative to the rest of Commodities. The fundamental of under-appreciated Chinese demand that appears to be growing also adds another bullish wrinkle to the Grains. With the European Currencies continuing to trade their own fundamental story the Currency sector has very few correlated players to the rest of the market with the Australian and Canadian Dollars and the Yen being the best macro base trade right now. The market is still in a relatively sideways volatile trade for the last couple weeks, so I still recommend picking your spots and taking profits when you cover a decent move as continuation has been fleeting at best on moves over two days.

Buys to Watch:

July Soybean Meal- July Soybean Meal has the strongest chart in the Grain sector right now and has a bullish head and shoulders pattern that was set off last Thursday with a breakout of $278.3 and a projection to $307.5. As Chinese demand continues to grow and money flows into the Soybean Complex open interest has continued to rise in Soy Meal and Soybeans. While I do not have a strong entry point in the Meal right now I would focus on the lower speed line on the recent rally for Meal that has a value today of $284.9 and plan the trade around the two days of support based around $280 to $282.8.

November Soybeans- Like the Meal the Soybeans are also positioned for a rally continuation right now and after the breakout above $9.49 1/4 now have a projection range from $9.86 to $9.92 1/2. Open interest continues to pile into the Soybeans and the chart looks technically strong, but be aware that daily Stochastics is close to producing a sell signal in overbought territory. Like the Meal I do not have a great entry spot for the Beans today, but would make the trade based around the support from 9.54 1/4 to 9.57, which held as the low yesterday on a pullback. Sidenote: After a break in the Corn and Wheat markets on Monday following the SEC filing against Goldman Sachs both markets rebounded nicely as worries that the long Goldman fund would have some liquidation were mostly forgotten. I still recommend buying breaks in both of these markets and in the Grains overall for that matter.

Cocoa- Cocoa placed a high close yesterday above the breakout level of $3033 that now has a projection to $3231 on the cup and handle pattern. The chart has a great technical base right now and both weekly and daily Stochastics have produced a confirmed buy signal that is supportive of the rally. A break from the highs overnight prior to the open this morning has left the opportunity to enter currently based on the support to the 3013 level. However, prices below this level could travel much lower into the low volume acceleration from the rally yesterday morning down to the $2970 level for another entry point.

Cotton- After failing to rally above it's consolidation range on two weeks ago Cotton has now strongly rebounded and posted a higher close yesterday above the range with strong follow through today. This breakout represents is also represented on the weekly chart as a whole new rally continuation leg after a flag pattern. The initial pattern on the daily chart had a breakout level of 84.24 cents and has a projection to 89.08. However, if this is the start of a whole new rally leg on the weekly chart the market also has a weekly projection on a new leg to the 95 cent area. I would base entry right now around the base from overnight trade and yesterday's close and to look for breaks to buy rather than extensions. Cotton can be a thinner market at times, so do not jump onto a boisterous rally like the one on the open this morning, but wait for the pullbacks.

Sells to Watch:

Put on the Radar:

Sell Metals- I am still hesitant to move the Metals to the sell category for right now as they can travel with the strong Equities, but the sector was definitely the lagger on the macro rally from the morning yesterday. The low volume traded zones that I had for each Metal market were all hit simultaneously yesterday with the values of Gold $1143 - 1146.5, Silver $18.01 - 18.15, and Copper $3.5380 - 3.5570 and all served as the highs yesterday and again overnight. With open interest heading the strongest into the Gold market right now as a safety hedge I believe that Copper and Silver continue to be the best sales as they have less long interest for the time being and usually perform better on breaks. A third entry into these low volume areas could mean trouble for their prospects of holding, so I recommend using them as an area of resistance for entry on rallies, but to use caution if they approach these highs with strength. All of the Metal markets have a negative mode on Stochastics momentum indicator and should be played on the short side.

Notes:

Crude Oil- Although the Crude Oil was one of the stronger Commodities yesterday I still believe that selling rallies are the best way to play the Energy sector for the time being. Crude has repeatedly struggled around the $84.50 level the last 24 hours, but I am waiting for a rally to the $84.82 - $85.08 lower volume traded zone with resistance above from 85.08 to 85.32 before attempting a sale.

Tuesday, April 20, 2010

Tuesday 4/20/10 Commodity Ideas

Opening Note:
After a weaker opening Sunday night and into Monday morning the macro market was able to find support by mid-day yesterday fueling a rally in supportive Commodities and Equities that has continued into this morning. While a number of larger bearish projections were set off, namely in Crude Oil and the Australian Dollar, these moves only were able to fulfill a move to halfway or less on their projections before negating these patterns overnight. Looking at the individual daily charts across the market sectors, Equities still look the strongest and remain the best buy on breaks along with the Soybean Complex. However, Energies and Metals still look as though they have formed a top on their extended rallies and look like a sale on pullback rallies, which there are plenty of. The main goal right now is to avoid getting chopped up in these volatile swings right now and to try to pick your spots carefully by using less risk and exiting quickly if the market does not hold your entry price. While all of the intraday resistance levels I noted for initiation yesterday held temporarily for at least a couple hours they were not pivot points on a bigger continuation down in the markets. Right now waiting for 1 1/2 to 2 1/2 day pullbacks for continuation is the more prudent method for initiation as most Commodities have not seen liquidation in open interest and instead continue to see maintenance if not in increase in positions.

Buys to Watch:

July Soybean Meal- Overnight my largest traded contract switched in Meal from May to July, so I recommend trading July and will refer to it going further. The Meal has the strongest individual chart of any of the Grains right now and has a sizable bullish head and shoulders pattern for July that was initiated Thursday and confirmed by the rally yesterday. The pattern had a breakout value on Thursday of $278.3 with a projection to $307.5. Open Interest continues to rise in the Meal and Stochastics maintains a positive mode for momentum in the market. Right now I do not have great entry levels in the Meal but view support over the last two days from 280.0 to 282.8 as a base for initiation on a price break.

November Soybeans- The Soybean contract is what is providing strength to it's Meal component and right now the November contract has the strongest bullish technical chart. After it's breakout rally out of consolidation above $9.49 1/4 last week the November contract now has a projection from $9.86 to $9.92 1/2. Like Meal Soybeans have continued to see a rise in open interest on the 2 week rally, but do have a troublesome indicator as the daily Stochastics is now sitting in overbought territory and dangerously close to setting off a sell signal. Despite the possible momentum sell signal I still feel the Soybeans have strong continuation prospects on their rally. Yesterday the market briefly entered the low volume buy zone from $9.48 3/4 to $9.51 1/2 before rallying with conviction into this morning. Like the Meal I do not have a good entry zone today, but look at the support from $9.54 1/4 to 9.57 as support to purchase against. Note: The July-November Soybean spread is not working well on rallies currently, which should be taken as a non-supportive indicator on the rally as it tends to work on strong demand driven rallies.

Sells to Watch:


Put on the Radar:

Sell Metals- After a devastating break on Friday and some continuation lower in prices into Monday morning the Metals found a supportive rally led by long entry in the Gold market. The Gold, Silver, and Copper charts all continue to look bearish on their daily charts, but the strength of the 24 hour rally has caused me to move them from the sell column into the Radar. Each market has a decent low volume area for price rejection that has indicated the highs on the day thus far, but the characteristics of the Silver market still lead me to believe that it is the best sale of the group. The low volume price traded areas are as follows: Gold $1143.0 - 11.46.5, Silver $18.01 - 18.15, Copper $3.5380 - 3.5570. Gold had the largest open increase yesterday as it appears that risk aversion is causing some to enter the Gold market for safety. Furthermore, although the Gold to Silver ratio (Gold - Silver/2) was weaker yesterday it still is definitely not a sale right now on the daily chart, which should support Gold prices over those of Silver. Copper does also appear to have a bearish top, but also experienced and increase in open interest yesterday while Silver only had a slight increase, making Silver the best sale at these levels in my opinion still. Because the recent rally was fierce I recommend waiting for a rally into the upper half of these zones and exiting short positions quickly if the market is not cooperating.

Sell Crude Oil- Crude Oil found support yesterday in the extended low volume price traded zone from $81.32 to 82.16 that correlated price-wise to the initial target zone I had for the May contract last week. The support was followed by a creeping but strong rally into this morning thus far, negating the bearish cup and handle pattern temporarily as it has traded above the $83.75 breakout. There is a moderate low price traded zone from $84.82 to 85.08 that has decent resistance from $85.08 to 85.38 from previous days' trade. I am waiting for prices to reach this level before attempting to a sale as the market still seems more than willing to continue buying Crude despite the bearish mode of it's chart. Open Interest slightly increased again and is back near the highs for the year as it has increased even on breaks in the market. Right now nearly 60,000 outstanding longs that have purchased throughout April are net losers on their position and I believe that this leaves a strong potential for a long covering break if prices continue to decrease, so I am still waiting to play the sell side of the trade.

Notes:

Australian Dollar- In what now appears to have been a big bait and switch the Australian Dollar market has rallied over 160 ticks off it's lows from yesterday morning negating the bearish head and shoulders pattern after reversing above the .9160 breakout. The market has already eclipsed any low volume resistance zones and could possibly be a buy on a new leg with a continuation rally above earlier resistance, making it a no trade for right now and definitely not a sell.

Cocoa- July Cocoa now has over a month and a half of technical base on it's daily chart and with a rally above $3033 has a projection to $3231 on the cup and handle pattern. Daily and weekly stochastics both have recent buy signals and maintain a positive mode for momentum on the rally. Although open interest has decreased month over month in the Cocoa this chart looks similar to the Soybeans where technicals may be able to override any fundamental story and lead prices higher.

Monday, April 19, 2010

Monday 4/19/10 Commodity Ideas

Opening Note:
With the announcement Friday that the SEC has filed charges against Goldman Sachs the market finally took a bearish breather as the potential catalyst for a corrective leg down was introduced. The Metal and Energy Commodity sectors were hit hardest by the news along with the stock market on Friday as it appears that the market is making a macro top to it's 50 day rally since February. While the Metals and Energies were absolute bombs I was pretty underwhelmed by the break in Equities as I believed there was much more room to travel to the downside. The market is setting up the stage for a battle this week as tiring bull markets set off bearish signals, but will have to battle the money flow that continues to pile into the market whenever there is a dip or sell signal. For this reason I am still tepid about selling the Equity Indexes on a longer term trade, but believe that there is now a whole lot more risk to the downside, so I will focus on selling rallies in Equities and any other correlated markets. As a cautionary note I would be careful tying the movement of the European Currencies and therefore the Dollar Index to moves in the market right now. It is natural to look at your screen and see Dollar up and Equities Down and tie them together, but with a big fundamental story weighing Europe down these Currencies are now very out of tune with macro movement as they have already been stretched like a rubber band out of line. On Friday during the macro and Equity break the Euro was like watching paint dry as most of the loss in the market came overnight with very little movement during U.S. hours. While the path of least resistance for the Euro, Pound, and Franc is down right now this only has a slight correlation to the Equities, so I would use the more closely correlated Currencies like the Australian and Canadian Dollars for Currency trades on a potential leg down.

Buys to Watch:

Soy Meal- To form the head and shoulders pattern on the daily chart draw a neckline from the spiky highs from Feb. 23rd and Mar. 30th to receive today's breakout value of $282.8 and the projection to $315.1 for the May contract. While this is an awkward pattern because the neckline highs were spiky the Meal does have characteristics other than the pattern that make it a good buy. Technically, open interest in the Meal has strongly risen on the recent rally and Stochastics remain in a positive mode on the daily and weekly charts. With the Soybean Complex leading this potential Grain rally the Meal is also a strong buy because of Bean Oil weakness. With a correlation to the falling Crude Oil and Energy sector the Bean Oil also has a weak outright chart allowing the Meal to absorb more of the Bean rally. Because of this I would also look at buying the Meal versus the Oil on further dips.

November Soybeans- With the old crop failing to keep pace with the new I am focusing more on the stronger November contract as a buy right now. The chart has a cup and handle rally out of the consolidation breakout of $9.49 1/4 with a projection range from $9.86 to 9.92 1/2. The market has taken it on the chin overnight as much of the world is down on the day, but the Grains did hold up very well Friday despite a large bearish macro move. Open Interest for the Beans has continued to rise on the recent rally, but right now there is a threatening sell signal on the verge of setting off in the daily Stochastics. However, I still believe the market is a good buy on a pullback to the consolidation breakout as there is a good low volume zone. From the Thursday acceleration there is a buy zone from $9.48 3/4 to 9.51 1/2 with support from 9.45 to 9.48 for stop placement and good risk reward.

Sells to Watch:

June Crude Oil- Make sure you are trading the June contract now as it is the high volume contract or you may get a call asking how you wish to collect your 1000 oil barrels down in the Gulf. The June contract has a topping cup and handle pattern that was set off on the break overnight with a breakout value of $83.75 and a projection to $80.24. This morning the Crude has found support in the large low volume area from $81.32 to $82.16, which should provide some support as the market heads towards it's projection. The nearby spreads for the Crude Oil continued to weaken again Friday, but are stable this morning with the June-July spread still sitting around -$1.50, which is still bearish the outrights. Stochastics also still has a confirmed sell signal on the daily chart and is in a negative mode. There is a moderate resistance area on the overnight trade from 83.30 to 83.62 to initiate a sell against on a rally today. Sidenote: Heating Oil is the weaker market right now and could be the better sale as a product on this move. Also keep a potential move in the RBOB vs. Heating Oil spread on your radar. There is a bullish cup and handle pattern forming on the May daily chart with a breakout of 9.63 and a projection to 14.07 that favors the RBOB.

Australian Dollar- This is a very similar looking chart to the Crude Oil as the Aussie is based on a resource and commodity rich economy. Like the Crude the Aussie has a bearish cup and handle top that was set off overnight with a breakout value of .9160 and a projection to .9016. For initiation there is a moderate low volume area from the overnight trade around .9150 with better resistance above from .9185 to .9200 for stop placement. Although the weekly chart does have a bullish head and shoulders pattern currently the daily chart has also produced a confirmed sell signal in Stochastics with a continuation in a negative mode. As the Australian Dollar is more closely correlated to the Equities and macro picture right now I believe that it is a better play on a corrective leg than the European Currencies with their jumbled fundamentals right now.

Put on the Radar:

Silver (and other Metals)- After the largest break pound for pound in the market Friday I believe that Silver is giving signs today that it needs to rest for a little before becoming a stronger sell again. Right now the Silver has bounced off the top of it's previous consolidation zone from $17.50 to $16.50, but I believe that it will likely continue downwards for a test of this 16.50 base and potentially further to the 15.40 area assuming a downward correction in the macro market. The speed line off of the base of the rally for the silver sits at $17.37 today, which should also provide further support on the test. Gold right now is bouncing around the neckline from it's large daily head and shoulders formation that has a value of $1131.4 today. The Gold however has reversed in relation to the Silver and is now gaining on it (Gold - Silver/2) so I believe that Silver is the better future sale. There is a previous low volume support level from $17.75 to $17.825 that should act as resistance and a nice area to sell on a rally.

Fixed Income- The longer term fixed income contracts of Ten Year Notes and Bonds did not impress me on their rally on Friday as the shorter term yields outperformed them price wise. I believe that this corrective move on Friday could provide some opportunities on the yield curve spreads, which I am exploring and should have some trade recommendations on in the future.

Notes:

Cocoa- Cocoa is building a base cup and handle pattern that has a breakout of $3033 with a projection to $3231. Both daily and weekly stochastics have confirmed buy signals that support the trade and are in a positive mode.

British Pound vs. Euro- Looking at the differential chart (Pound - Euro) there is a bearish double top pattern with a breakout of 1759 and a projection to 1600. The Pound has performed worse than the Euro the last few days after failing on it's bullish consolidation breakout and if this pattern engages should remain the short term better sale.

Friday, April 16, 2010

Opening Note:
Following a dip buying spree on Tuesday and a follow through continuation rally Wednesday the market was very quiet yesterday with Energies and foreign Currencies slightly weaker on the day and the rest of the market slightly firmer. While open interest continues to rise in Commodities it appears that fundamentals may finally be taking hold in the Energies markets as the Crude Oil spreads severely widened again yesterday after a corrective rally mid-week. With the spreads this wide and sitting on new lows it is hard to believe that any sort of money allocation will be able to hold prices higher much longer as the sector should begin to weaken further. The Grains on the other hand are finally rocking and rolling with the seasonal trend as Soybeans are leading a bullish push in the sector on demand prospects and technicals despite bearish supplies and overall fundamentals. After trading as one of the weaker sectors over the last week the Metals are showing their resiliency now as Gold looks primed again today to test a close above it's old high trade of $1164 for the year. The European Currencies are again rejecting a technical rally breakout above their sideways range amid concerns of further debt problems in the EU. I believe that with this latest rejection that theses Currencies should be played from the sell side going forward. After repeatedly failing on a bullish head and shoulders pattern over the last few days the Interest Rate markets finally negated the pattern yesterday, but recovered on a trending rally that should lead them back to the highs of their recent ranges. Finally, Equities continue to perform as the strongest sector. Now entering the 51st day of their rally without a correction buying dips still is the profitable way to be playing them, but use caution going forward as potential weakness in the core Energy and Metal sectors could finally snap the rally back to reality.

Buys to Watch:

Soybeans- Led by money flow and technicals the Soybeans finally rallied above the range that they have traded since February. The November chart looks the strongest technically of the Soybean contracts and now has a rally continuation projection from $9.86 to $9.92 1/2. However, it is improbable that November continues to lead the market higher without the old crop leading the way. The May soybeans have a cup and handle pattern with a breakout yesterday of 9.77 1/2 that has a projection to 10.24 1/2. For long entry purposes there is support in the May Beans from 9.77 1/2 to 9.80 1/4. There also is a small low volume zone below this support from 9.74 to 9.76 1/2 for entry on a spike below support. Looking at a weekly chart I have also noticed that along with the Beans the Meal has finally negated it's downward trend and could have more upside pop than the oil. With Crude having downside potential and the outright Meal chart looking much better than the Bean Oil I would also look at buying the Meal and selling the Oil as a spread. Side Note: May Corn has a bullish cup and handle pattern with a breakout level of $3.59 and a projection to $3.74. Because Corn has a bullish pattern despite being the previously weakest Grain market I recommend playing the outright long side of soybeans rather than spreading them against another Grain.

Sells to Watch:

Crude Oil- Despite a furious dip buying rally in Crude on Tuesday the market again found resistance around the $86.30 level and has weakened nearly $2 from this level over the last 24 hours. The nearby May-June and June-July spreads took out their previous lows yesterday and are continuing to weaken today as well. Despite the corrective rally over the last year Crude has had at least a moderate price break each time these nearby spreads have dipped below -$1 as they are now decisively below. I believe that the Crude fundamentals are now catching up to the market and prices will continue to weaken. Although open interest continues to gain in the market holding up prices recently I do not think that there is enough ammo left to rally the market above the now major resistance level from $86.25 to $86.40. As I thought during the break at the start of the week, Crude should travel to support between the $81.80 to $80.80 level on this current leg down, with support at the $82.50 level on it's way down. On a rally there is a decent low volume zone to sell from $85.00 to 85.25.

Put on the Radar:

Gold- The Gold still has the large bullish head and shoulders pattern on it's daily chart with a breakout of $1135 and a projection to $1244. I am still waiting for a close above the previous high trade of the year of $1164.1 to place Gold on the buy list. However, after a very weak attempt at a test of these levels this morning for the fifth time it appears that Gold may not have the strength to climb above these levels. I am watching the the speed line from the lows on March 25th to March 31st for negation of this rally, which has a value of $1148.4 today. I am also watching the Gold vs. Silver ratio (Gold-Silver/2) for a reversal with Gold strengthening against the Silver. Both are likely to occur at the same time, which signals the Metals are fair game to sell.

Notes:

**I ran out of time this morning as the market was very active. The market has had a poor reaction to bullish earnings numbers and news this morning so I recommend playing the short side today. It looks like there is potential for a large break by today's close.

Thursday, April 15, 2010

Thursday 4/15/10 Commodity Ideas

Opening Note:
As in most instances following strong dip buying over the last year the macro market was stronger yesterday with follow through of strong gains in Equities and Energies. Closing just off it's highs yesterday the market is slightly weaker this morning with a break in the Euro being the most notable move overnight. We saw Tuesday and again yesterday that the real movement in the market is the flow of money still with or without a side of fundamentals and technicals throwing in some influence. I have found that this money flow has become even more unpredictable as the recovery has proceeded and seems to come in from the long side when technicals appear to be weakening or in the process of confirming a reversal. This unpredictability has left me a little shell shocked lately as I can usually grasp a technical or fundamental buy or sell, but struggle with guessing when an investment bank is going to pull the trigger to buy a currently weak market based on long term entry. With so many false pattern continuations I am going to work right now on paring down the trade suggestions to only the strongest as I know that trading technicals right now can get you chopped up. As we are now entering the 50th day of the February reversal rally I could write an essay on why I have fundamental issues with the recovery, but still find that right now the best trade is waiting for the 9 to 10:30 a.m. bottom in the stock market to buy the dip and ride it until there are signs of weakness. I really did my due diligence overnight and this morning, yet still was unable to find a solid trade for execution today, but do have some trades and relationships to keep on the radar screen.


Buys to Watch:

Sells to Watch:

Put on the Radar:

Metal Weakness- Over the last couple days during the dip buying rally the Metals have notably not kept pace with the Equities and Energies. As I have repeatedly noted the Gold has a large bullish head and shoulders pattern with a breakout confirmed above $1135 and a projection to $1244. However, I have kept Gold off the buys list during this time waiting for a close above the high trade on its range for the year of $1164.1. The Gold has tested and failed three times at breaching this level with the most recent occurrence yesterday. Although open interest has continued to rise in the core Commodities of Gold, Silver, and Copper in this sector the prices in the markets have refused to budge to the upside despite the long interest over the last week. On a daily chart both Gold and Silver are on the verge of producing a sell signal on the daily Stochastics in overbought territory, while the Copper already has a confirmed sell signal that is advancing lower. Silver has now reached it's third leg projection range on the two and a half month recovery from $18.30 to $18.60. I have my eye on two indicators of further weakness to begin short initiation right now. The first is the Gold to Silver ratio (Gold - Silver/2) where I am looking for a reversal on the trend of Silver strength. Because Gold is used as a store of value and safety from Commodities, Silver usually performs weaker on a sector move to the downside, so a reversal to Gold strength should be a good sign. I am also using the base speed/trend line on the Gold rally beginning in late March, which by connecting the lows from March 25th and March 31st you receive a value of $1144.3 today. If one indicator sets off the other should as well and this will be the time to begin looking for short entry in Metals.

Buy Grains (November Soybeans Indicator)- I had the Grains on the buy list yesterday, but after a failure to on a breakout rally from the recent range I am downgrading them to the radar. The Soybeans right now look to be the leader if a recovery rally is to be mounted as both the old crop July and new crop November beans are both sitting just off the highs on their tight range since mid-January. The November Beans are the closest to their breakout level above $9.50 and actually made a sneaky new high close a half cent higher despite their rally failure yesterday. However, for this to be a real story I believe that the old crop Soybeans need to be stronger than the November and need to find their own rally, making them the must have indicator if Grains are to start a short covering rally. There could be some weakness today after the spike failure in the Beans and Corn on the short range trade, but there appears to be momentum building on the export/demand side as prices have rallied back after a pretty awful supply/demand report at the end of last month.

Notes:

Ten Year Note- The Ten Year Note had the strongest bullish head and shoulders pattern among the interest rate products in my opinion, but has failed after repeated rally attempts and negated the rally pattern. The last real hopes for support are around the 116.06 level, but with Bonds moving lower I believe that this is no longer a buy and could possibly be a short term sell as there is little support in the market until the 115.27 level. While it is a less attractive head and shoulders the Five Year Note still has it's pattern intact, but I have little hope for bullish continuation now as well. The tipping point for me on this trade was yesterday when Bernacke used the same language of "extremely low" and "extended period of time", but the fixed incomes could only produce a pedestrian rally followed by failure. It looks like these markets are just not buying what The Fed is continuing to sell. The Fed's tone should change in the coming months as interest rates are likely to unlock some time by the fall and the failure of fixed income prices to rally leads me to believe that the short side of this trade should be played going forward.

Euro/Yen Cross- The Euro Yen Cross is potentially creating a double top pattern on it's daily chart after weakness in the Euro overnight. The market originally had a bullish cup and handle pattern that failed at this same level after reaching only 2/3 of it's projection. The Cross is often used as an indicator of market direction, but with the Currencies again having little to no tie to the outside markets I would use this information as a side note on your directional opinion.

Australian Dollar- The Aussie is still broken out on it's weekly head and shoulders pattern, but is still under pressure on it's daily chart as it had difficulty producing a strong rally above resistance on it's high spike. Unless the market is able to rally and hold a close above the .9300 level today I believe that it is a good fade against this level. Stochastics on the daily chart has flirted with a sell signal in overbought territory the last couple days and the failure to make new highs should be seen as a rejection reversal awaiting confirmation on a down leg.

Wednesday, April 14, 2010

Wednesday 4/14/10 Commodity Ideas

Opening Note:
After weak action overnight leading into yesterday and a sizable break on many individual market opens the macro market starting at around 9:30 a.m. had one of the strongest reversals in recent memory as huge buying entered on the dip. All you have to do is look at some of the gains in open interest yesterday to see that this was one of the largest mass purchasing efforts of the entire recovery rally. Right now there is a bit of a battle waging between economists on the prospects of inflation or deflation on the horizon and it appears that since the last two days of March that investors are betting huge on the inflation side. Open interest has relentlessly risen across the board, but especially in the Metal and Energy sectors over these last two and a half weeks regardless of whether prices increase or decrease. Equities look very strong again after a brief sideways consolidation towards the end of March and are continuing to prove that if you find a dip or a solid trend to continue buying. The fundamental story right now has as little to do with actual movement right now, which is why I would also caution being short the Grains. Although the story for Grains is pretty much bearish across the board almost all of the individual markets look to be building a technical base that could fuel a short covering rally in the sector with allocation potentially rolling in. Right now it is extremely difficult to make money or find a decent move selling any market, so you pretty much have to bide your time, look for buying allocation momentum, and watch for the 9 to 10:30 a.m. dip buying that often makes the intraday check mark chart.

Buys to Watch:

Ten Year Note- The Ten Year Note has a bullish head and shoulders pattern that was initiated yesterday and is looking for a confirmation close above it's neckline today. The neckline stands at 116.07 for today and the chart has a projection to 117.235. There is support in the market pretty much solidly from 116.07 to 116.13, but I would keep your stop tightly below this 116.07 level on entry because a failure below this level could cause a rapid price break to 115.275. Stochastics still maintains a positive buy trend on momentum supporting the trade.

Grains (November Beans) - With November Beans constructing a strong technical base and both Corn and Wheat continuing to reject lower pushes in price I believe that the Grain sector is primed for a move to higher prices fueled by more long allocation and short covering. Huge supplies in pretty much all of the Grains and increased planting have weighed on prices most of the last year keeping them relatively low compared to the recovery across the market, but it has been a painful struggle to make money taking the markets lower. With the strong technical base and the relative cheapness of the Grain sector compared to others I believe that big money is beginning to take notice leading to stronger long allocation in the near future. The Wheat market looks potentially more explosive than the others based on the large increase in open interest on lower prices this year, signifying that this is a massive short position based on the World supplies. November beans look like they may lead the way on this rally as they are sitting just off their highs since early January on a 3 month base range. The high close on this range is $9.45 3/4 and the high trade is $9.49 1/2 so look for a breakout to possibly occur today. By projecting from the base of this range a rally projection from $9.80 to $9.90 seems very feasible. Because almost all of the markets look like they have bullish potential I recommend looking at long plays on the individual markets right now rather than spreading between the Commodities until a possible rally becomes more clear. Although Corn looks like it has the weakest chart it still managed to close stronger than any of the other Grains yesterday, so I would stay away from spreading it short against a long Bean currently.

Sells to Watch:

Put on the Radar:

Gold- Gold still has the large head and shoulders pattern on the daily chart with a breakout level of $1135 and projection to $1244. Despite a day and a half break in the Gold market the open interest continues to rise despite the price action making this rally technically strong. I am still waiting for a close above the high trade of the year of $1164 to upgrade it to a strong buy on the larger move, but believe that it is now more a matter of time before it is able to continue above these resistance levels. Note: Silver has reached it's 3rd leg rally projection zone from $18.30 to $18.60 and has failed to rally above this 18.60 level. As the Gold is highly correlated to the Silver this could be temporarily bearish the Gold. Stochastics on the Gold has also produced a sell signal today in overbought territory, but has yet to be confirmed by a close, so be cautious in long entry on the Gold.

Notes:

Cotton- Cotton is now off my sell list after the large late day rally. The market did have a couple bounces off the moderate resistance level that I was looking at shorting against, but powered through it later in the day, covering all of the higher low volume area up to the next resistance area above 80.55. The trade was not very attractive after the market remained relatively strong and higher on the day despite the Commodity break on the open yesterday and finally gave up the bearish pattern and looks to remain in a range for the time being.

Crude Oil- The Crude Oil did have a strong break early in the day, but after reaching the moderate support level of $82.50 found a strong rally on massive long entry into the market. During the five day break in Crude open interest continued to rise despite falling prices and again increased a whopping 58,000 contracts yesterday. It looks like the large long position is unconcerned with a price break at this level and has a lot of money to continue allocating to the market, holding up prices. As I was watching the trading ladder yesterday I noticed that not only was the long entry relentless with huge orders, but there were a number of people playing psychological games with phantom orders and icebergs to almost scare the market price up. I do not think that you can fight this size of long entry so I recommend liquidating shorts and sitting on the sidelines for a little bit. Although the nearby spreads have rallied slightly over the last 24 hours they still are at dangerous levels for outright prices if they decrease further. Also, be cautious of the 9:30 report this morning if you are sitting long. It is expected that there will again be an increase in U.S. Crude supplies for the 11th straight week, which would be a new all time record and pretty odd considering the 2 month rally in prices. I still have trouble believing that prices will continue to rally, but can not recommend fighting money flow, so I am staying flat.

Aussie Dollar- I have a weekly head and shoulders pattern on the Aussie Dollar with a breakout last week of .9153 and a projection to .9851. Stochastics has a sell signal on the daily chart now in overbought territory and the market is currently fighting with the low volume area from .9239 and .9269 with some resistance above. If the market is able to close above these levels the Aussie will become a buy.

Tuesday, April 13, 2010

Tuesday 4/13/10 Commodity Ideas

Opening Note:
After a strong gap higher opening on Sunday evening on supportive Greece news the macro market gave up much of it's gains by the close Monday and is modestly weaker again this morning. I still have the same sentiment as yesterday regarding this market action as when the market gapped higher I expected a supportive rally to ensue yesterday. This failure to hold higher prices is a signal to me that the Commodity and Equity markets are temporarily tired of the crawl higher game and should continue to weaken on a moderate leg down. While this leg down applies to most of the market I believe that the Currencies right now are caught in a sideways game of false breakouts and rumors. Right now I am keeping a number of the currencies on my radar, but recommend keeping your stops tight and your opinions loose as the market has reversed it's look on a dime. Overnight both Gold and Silver were the leaders on the downside move followed by Crude Oil. I still believe that Crude Oil is the safest and best sale right now specifically because of the May spread action, but was taken by surprise yesterday by what appeared to be continued buying allocation on the open in the Crude. On their earlier opens the Metals fell like rocks and the Equity markets only had a brief rally that was quickly negated. I will still have the Crude as a sale today, but caution about the open because this was the only Commodity that I saw strong allocation in on it's open yesterday. I recommend continuing to look for stronger sales and weakening macro market trades as I believe that this temporary break will continue into a moderate leg down correction.

Buys to Watch:

Ten Year Note- Along with the Bonds (and I guess you could also say the five years) the Ten Year Note has a bullish head and shoulders projection that has temporarily set off this morning. To create the Head and Shoulders draw a neckline from the highs on March 31st to April 8th. The pattern has a breakout value today of 116.075 (not coincidentally the lows so far) and a projection to 117.235. As I also stated, the Bonds have a similar head and shoulders pattern that was set off yesterday at the 115.26 price with a projection to 117.23. I feel more confident in the ten year note right now because the technical look of the pattern is much cleaner and has a smaller right shoulder than it's left, usually implying more explosive qualities on the pattern. Stochastics for the Ten Year remains in a positive mode as well, supporting this upward momentum continuation. There is support in the ten year to 116.07, but there is a larger low volume area below this that could allow prices to fall much further, so I recommend keeping the stop pretty tight on this trade for right now. Sidenote: I am beginning to look at trade ideas and positioning in the fixed income markets for the rise in rates that should begin in the near future. Right now I technically like the base on the Bonds versus Five Year aspect of the yield curve (Bonds*3 - Five Year*7 to chart). I am keeping my eye on the gap in the chart from -457.29 to -457.19 as a spot to attempt buying a small initial position in this spread for a longer term trade.


Sells to Watch:

Crude Oil- To see why I am excited about the short on the Crude Oil market just pull up the May-June and May-July spreads for the market and notice the dramatic cliff fall that they have taken over the last week. Over the last year during the recovery each time that the nearby 1 month spread has continued below -$1.00 the outright Crude Oil market has experienced at least a moderate break in prices. With the May contract now seemingly having a top that has led to four consecutive losing days I believe that another moderate to larger corrective leg is underway. Although open interest has continued to rise in the market at a fast pace over the last two weeks, including yesterday, the price has not followed this allocation. Stochastics provided a sell signal for the market in overbought territory on Friday that was confirmed yesterday as well. As I stated earlier, use caution in the market right now because there still is long entry in the market on the open, even if other Commodities do not have the same allocation. I do not have a solid projection for the market right now, but I am targeting a move into the huge low volume acceleration zone from $80.84 to $81.80 with a possible test of the lows on the last consolidation range just below $80. There is minor resistance from previous low spikes and overnight trade from $84.06 to 84.26 today. The next moderate support levels for the market on it's way to this acceleration zone are from 83.30 to 83.66 and 82.54 to 82.70.

Cotton- I am taking one more shot on the Cotton as a sale today as it has sat in a consolidation range below the breakout after setting off on Friday. The topping cup and handle pattern on the Cotton had a breakout of 79.27 with a projection to 75.58. The Cotton has sat in a range trade for the last month and a half, during which time open interest continued to increase until the most recent sell off. While the possibilities of a large amount of longs caught are diminishing it still appears that the Cotton has a lot of room to take prices lower on a move from this consolidation. On a rally I have a small low volume zone for short entry from 79.43 to 79.62 with minor resistance above from 79.63 to 79.85. It is important to keep your stops pretty close on this one though because above this resistance the market looks like it has potential to rally at least halfway back up the range to 80.55.

Put on the Radar:

Gold- The large bullish head and shoulders pattern with a neckline from the highs January 11th to March 3rd appears to be coming under some trouble over the last 24 hours. The pattern had an original neckline breakout value of $1135 with a projection to $1244, but is now having difficulty making a settlement value above the $1164.1 high trade for this year and upper end of it's range. The chart does still have a very nice technical uptrend on the recent two week rally with open interest continuing to gain daily on the move. However, the related Silver has now reached it's third leg bullish projection from $18.30 to $18.60 and has experienced a stronger failure over the last 24 hours than Gold. As Silver is usually more closely correlated to "Commodity Moves" I take this Silver rejection as a sign of potential topping and further weakness for Commodities and possibly Gold as well. The Gold found support overnight in the moderate lower volume support zone from $1148 to $1150.2. Below this level there is also a better support gap from $1139.6 to $1143.8. Right now I am watching the speed line from the lows on March 25th to March 31st as an indicator of rejection on the bullish Gold move, which has a value of $1140 today. Although I have ranted about my fundamental and relationship issues for the Gold I will upgrade the trade to a buy on the larger projection with a close above the yearly high of $1164.1.

Notes: I am using this to discuss the Currency sector right now and it's potential moves. I do not believe that the Currencies are a good sector to trade currently, but these are future ideas.

Euro- The Euro has a bullish cup and handle pattern with a breakout of 1.3593 with a projection to 1.3903. Because the Euro has had so many false breakouts, legs, and patterns lately and is being traded mostly on Greece rumors and daily news I recommend staying out of the Euro right now. If you are bullish the Euro and would like to buy the idea I would look at buying the Pound right now as it has a stronger base and chart right now than the euro and has been less affected on the daily Greece news.

Australian Dollar- The Aussie has a bullish head and shoulders pattern on the weekly chart with a breakout last week of .9153 and a projection to .9851. However, the daily chart for the Aussie has me slightly concerned technically as well as fundamentally because it should fall on a Commodity break. Stochastics produced a sell signal in the Aussie yesterday in overbought territory that is looking for confirmation today. I am keeping an eye on the low volume resistance level above the market from .9239 to .9267 to gauge if the market will continue higher on the weekly or reverse out of this area. The Aussie is closely correlated to the Canadian fundamentally, so an Aussie rejection could also mean trouble for the Canadian.

Japanese Yen- As I stated a couple days ago I am still looking for the Yen to travel back into the acceleration low volume zone from 109.18 to 110.34 to look at selling 114 or 115 calls for the far out December expiration month. I will discuss the fundamental and technical reasons more in depth as the market approaches these levels, but keep it on your radar.

Dollar Index- The Dollar Index has a cup and handle topping pattern with a breakout at 80.52 with a projection to 78.98. Because the Dollar has been skittish and in a range like the Euro I do not have strong confidence in this trade, but recommend keeping it on your radar as it will likely reach it's projection with a close below 80.00.