Friday 9/10/10 Commodity Ideas

Opening Note:

*Roll your Equities & Currencies to December

Yesterday
The market ended higher on the day, but after an early morning rally it was mostly a slow grind lower throughout the day. Crude Oil started the day strong and attempted a rally breakout above the recent consolidation zone, but fell nearly $2 from its early highs despite an EIA stocks number that showed a Bullish decrease in inventories. The Grains were one of the more interesting Sectors with Wheat leading the gains with a move that completely retraced Thursday's losses and Corn proving its strength with a settlement above the $3.70 resistance level. It actually was a little surprising to me that more buying entered the market with such strength the day before the report, but at least the market's have confidence. Finally, Gold dropped $15 after an early morning rally attempt at the yearly highs as the market now looks to be topping after the odd looking 30 day rally.

Today
The market's are slightly firmer, but still are sitting below yesterday's highs in most cases. Crude Oil is the clear winner this morning as the nearby spreads have moved back in with strength overnight, providing a Bullish push for the market. The Grain markets have held yesterday's gains into this morning with Cotton actually mounting a decent rally overnight, but today's trade will hang on the 7:30 am number. Other than that the markets are pretty much asleep, but in order this morning.

Volume has remained awful throughout this week making most of the market action choppy and less meaningful in my opinion. There still looks like there are some decent trade setups on the horizon, but for right now pretty much everything remains on the radar as the directional moves in the market still remain choppy at best. With the S&P 500 now battling with the now 1105 - 1121 for the December contract I expect that gains in the market will be tempered today. For my part today I intend to trade the first hour of the post-report Grain markets, but other than that I have my Aussie Dollar position and I am going home early to make sure my fantasy football rosters are in order for the weekend.

Late Grain Note:
At just a brief glance the report looks Bullish Corn, Bearish Wheat, and Bearish Beans, but nothing outrageous. Corn is probably the best buy and Wheat the best sale. I still am on the lookout for an overbought pullback in the Corn market though with open interest sky rocketing with long spec positions, so beware about jumping into new longs with the intention of holding. It is possible that we could see a sell off despite this slightly Bullish report. The technicals are beginning to look very overextended and with the all of the short term objectives on the 3 leg advance now met the market may need consolidation before going after some of the weekly chart objectives.

Buys to Watch:

Australian Dollar- I will now be referring to the December contract rather than September, which is an adjustment of pretty much exactly 100 ticks lower. This makes the 3rd leg rally target .9417 with the head and shoulders bottom objective .9198. Overnight the Aussie Dollar pulled back to just above the low volume zone from .9092 - .9098 (and just above my resting buy order), so it was unlikely that you were able to add at the good setup. I intend on keeping my resting buy order at this same level with a stop below the .9070 higher volume support. Because I still believe this entry level is in play I still recommend using this stop level on the overall trade as well.

Sells to Watch:

Put on the Radar:

Gold- After two rally failures at new yearly highs the Gold market looks like it has a top and is nearly a sale. Both Stochastics and MACD now have confirmed sell signals for the market and drawing the lowest trendline for the 30 day rally from the low July 28th - August 24th you receive a value of $1247.5 today. Gold sold off this morning on its 7:20 am as I imagine most of the longs now have enough negative indicators to take profits. The dip buying and fading programs still look like they are being used in the market for the time being making holding a position difficult, but it appears that there truly is liquidation going on today making the strong dip buying algorithms less successful. If the market settles below $1247.5 today Gold will likely be moved to the Sell list Monday. Also note that Silver remains relatively strong compared to Gold so the suggestion may turn into a hedged ratio of short 2 Gold: Long 1 Silver.

Crude Oil- The Crude Oil nearby spreads have come back in overnight meaning that the short term Bearish supply story is fading for the time being. This propped up the outrights overnight after yesterday's sell off and could finally push the market above the recent consolidation. Above $75.44 the market has an objective of $78.25 on the Bullish cup and handle pattern, but this could be a difficult move to ride through the swings. Instead I am now solely looking for weakness around this objective level to enter a short position in the market. Open Interest rose yet again yesterday despite the mid-day sell off as allocation continues to roll into the market at an astounding rate without much increase in price. This is setting up a strong possibility that the Bulls become trapped with sizable losing positions causing another liquidation run towards the 2nd leg $61.50 target. I suggest sitting on the sidelines for this possible short term Bull move and waiting for the opportunity to sell what looks like the best trade setup on my radar.

Notes: