Tuesday 12/14/10 Commodity Ideas...Late Post

Opening Note:

Yesterday
In spite of the market strength yesterday an afternoon sell off in the Nasdaq caused the Equity Indices to settle near unchanged, or slightly lower for the session in the Nasdaq's case. The weekend news that China refrained from raising interest rates to curb inflation induced a bid in the risk trade. The Metals, Grains (especially Soybeans and Bean Oil), and the Australian Dollar all posted impressive gains with their higher correlations to Chinese demand. Both the Euro and Swiss Franc also moved significantly higher as short covering fueled the rally. The troublesome Commodity for the day proved to be Crude Oil and the rest of the Energies. Crude had a nice run to start the month of December, but continues to be a difficult long position to hold and a laggard in relation to the other Commodities.

Today
Yesterday's strength in the risk trade looked like it would continue early this morning. However, since 7 am the market has come under pressure. Of particular worry is the sell off on the open of the nearly always strong Silver, especially in relation to Gold. The Equity markets remain in slightly positive territory, but the weak Crude Oil and British Pound markets from yesterday have already reversed lower like Silver. The Foreign Currencies as a Sector appear to be the overall strength with the Australian Dollar, Euro, and Swiss Franc leading the gainers.

This afternoon is the FOMC meeting. Little is expected to develop as far as policy or interest rate change, but the focus will be on the language of the statement. I believe that there is very little chance the Fed delivers anything resembling Bearish news for the time being. They have already said that boosting the stock market to induce the wealth effect is something they are aiming for. It still appears that there is profit taking and position reduction going on in advance of the meeting. I am looking at this morning's correction as an opportunity though to possibly enter long positions in the strength markets of the Euro, Australian Dollar, Swiss Franc, or Equities. I also suggest still looking to buy the dips in the risk trade. For today I say this with trepidation though as the pullback looks like it could extend further this morning.

Buys to Watch:

Sells to Watch:

Put on the Radar:

Australian Dollar Bullish Head and Shoulders- Yesterday the Australian Dollar settled above the .9825 lower breakout level and today is seeking an advance above the higher neckline value of .9864. If initiated and confirmed then the Aussie would have a projection range of 1.0226 - 1.0282 on the pattern. Overnight the Aussie found support right near this lower neckline and produced a base to rally from. Although the pattern is not confirmed there is a low risk entry setup today that I believe is worth a shot on an initial position. From .9830 - .9868 there is higher volume support for stop placement below with the low volume zone from .9870 - .9876 providing a good level for long entry.

Euro and Swiss Franc Bullish Targets- The Swiss Franc eclipsed its own swing high of 1.0293 to produce an objective of 1.0490. There is higher volume support in the Franc from 1.0338 - 1.0362 as a level to initiate long positions against today. The Euro however has travelled back below its swing high this morning on a possible reversal. Above 1.3428 the Euro has an objective of 1.3799. There is higher volume support from 1.3374 - 1.3992, but with a strong test already done this morning and a blip of trade below this I recommend holding off for today. The Aussie and Swiss Franc look like better trades at least for today with their entry parameters.

Dollar Index Bearish Head and Shoulders- The reason you see so many potential Currency buys right now is because the Dollar Index initiated its own Bearish head and shoulders pattern yesterday. The neckline for the pattern extends from the low Nov. 22 - Dec. 7 with a value of 80.05 yesterday. This neckline has an up slope making it unlikely that it is rejected, but for today the value is 80.15 for reference. Like the Euro, the entry parameters for the Dollar Index today are not looking great. It is wise to hold off until tomorrow for entry now. The long term objective for the pattern is 77.20.

Notes: