Friday 4/9/10 Commodity Ideas

Opening Note:
After a day and half of poor market action leading into the morning yesterday the macro market found a strong uptrend on the intraday chart off of spike lows that carried many of the individual markets slightly higher to unchanged on the day. Most notable was the quick sell off in Equities on the 8:30 open that found the low of the day by 8:45 and caught a strong bid rally back to gains on the rest of the day. This spike recovery in the market paired with the continuation on gains in open interest across Commodities has me sitting a bit uncertain right now on big picture direction, because there may not actually be one right now. The Currency markets again are up to volatile sideways action with more false consolidation and pattern breakouts as they are trading the bipolar Greece news and rumors. The Euro found support yesterday as it neared the old low trade and is again rallying on short covering as it is very difficult to stay short for more than a couple days. I believe that the European Currencies right now are the key to any directional move if the market will have one. With the Euro in a sideways to only slightly lower range trade both Commodities and Equities seem content to continue on an upwards path of small gains and until there is a definitive breakout to one direction this looks like the game plan.

*USDA supply/demand report and crop production released this morning at 7:30 a.m. If there is notable news or trade ideas I will send an update later prior to the Grain open.

Buys to Watch:

Sells to Watch:

Cotton- On a weekly chart Cotton has one of the strongest rallies of any Commodity off the bottom from March of last year. In fact, until the last three days of large breaks Cotton appeared to be a potentially strong buy on a weekly breakout. However, after a failure testing the high or the recent range Cotton has fallen apart and posted a new 20 day low close below the range of the last month and a half. Fundamentally Cotton is battling with other crops like Soybeans and Corn for acreage and has also had a boost in exports in the February report, all of which led to the rally 2 months ago. Open interest has continued to rise since February on this story, but this fast price drop looks like it may have a lot of longs caught in the market. The daily chart has a double top move out of the consolidation range with a breakout of 79.27 cents and a projection to 75.58. Right now resistance for entry is tricky with much of the downward action coming on acceleration into the end of the day. Right now the best low risk entry level is against resistance from 79.50 to 79.80. A rally above these prices easily could cover the acceleration from yesterday up to 80.56, so keep the stops tight and enter with an initial smaller position if you decide to execute here as you can add when the move is confirmed. There is some moderate support below the market at the recent low close of the range at 78.77

*The Cotton supply and demand report at 7:30 a.m has not drastically effected the market thus far. As I am writing I have not had a chance to look it over yet, but there does not appear to be much rally potentially off the numbers.

Swiss Franc- The Swiss Franc caught a rally yesterday along with the rest of the market after it temporarily set off it's bearish double top pattern. The pattern has a breakout of .9307 and a projection to .9089. With many of the European Currencies trading the Greek daily news and rumor reports the trade has been less predictable lately so I recommend waiting for confirmation with two lower closes on this move before entering a short. If the Swiss Franc pattern does set off the Euro will most likely breakout below consolidation as well, which would be the better sell.

Put on the Radar:

Gold- Despite my fundamental reasoning behind the Gold trade yesterday the chart always takes precedence over the fundamentals and right now the Gold chart is very strong. The large head and shoulders pattern on the daily chart continues to have a nice strong uptrending base and open interest continues to rise on the rally displaying further strength (sidenote: my OI numbers are altered sometimes so yesterday's open interest rise was incorrectly stated). The old high close for the Gold of $1153.9 has yet to be eclipsed along with the high trade of $1164.1. With a close above $1165 I will move the Gold to the buy side of my approach and look for pullbacks and entry levels to buy on the projection to $1244.

Crude Oil and Copper- Both Crude Oil and Copper found a rally yesterday morning after overnight weakness and are stronger again today. However, I think that both markets as the strength of their sectors need to find another rally continuation today above nearby resistance or they will likely take some heat going into next week. Stronger Crude resistance sits between 86.38 and 86.82 and stronger Copper resistance sits between 3.6050 and 3.6260. The Crude found a current high on the day against these levels and Copper has rallied into them but failed to continue higher. If these levels hold for today I think you can use them as stops on a short of these markets.

Australian Dollar- The Australian Dollar has a sneaky head and shoulders pattern on it's weekly chart that is likely set off with a weekly close today above .9153. The pattern has a projection to .9851. The Aussie along with the Canadian Dollar have been the strengths of the currency sector on the recovery. Looking at the daily Aussie chart I do not have good buy entry levels right now, but keep it on your radar as a buy for long entry spots.

Notes: