James Mound
11-05-2006, 06:35 PM
November 3rd, 2006
Energies
A weak energies market bounced on Friday with some short covering ahead of the weekend, as fears of possible supply disruptions from Nigerian militants has the shorts taking profits. This bear flag is tough to digest fundamentally as winter heating oil demand is still in question and a ton of geopolitical concerns still hover over this market. Are we stuck with a long term over supply or is the market just offering us a much needed retracement ahead of another leg up on the next Middle East, Alaskan pipeline, Venezuela, Nigeria or terrorist crisis? I continue to recommend call buying in this downtrend. Natural gas is popping and could be a supply side indicator of what is to come in the energies complex, but the market must spike above 8.50 fairly soon to maintain bullish momentum.
Financials
The stock market exhibited weakness as flat to negative closes all week screams fund liquidation and profit taking in a market that broke a steep bullish channel. As I said last week, the market has likely seen the high on the S&P for the rest of the year with 1400 becoming key resistance moving forward. The jobs report showed the strongest numbers in five years and the market sold off on the news. Two months of strength in stocks brought huge dollars into funds. As they say, the individual investor buys at the highs and sells on the lows, and this money looks like it is chasing the profits. Bonds fell apart on the jobs number and appears to be ready to test critical 109-25 support on the 30yr., after which the market should have clear sailing to 107. The dollar needs to get through 85.88 to resume the bullish trend, and I see this recent 2 point pullback as a much needed retracement that sets up a run to 90. Don’t get caught up in the Canadian dollar’s micro-moves and look for a key break below 87 before jumping short. Take a look at some March deep out of the money Japanese yen puts.
http://www.traderslog.com/clip_image002.jpg
**Chart courtesy of Gecko Software’s TracknTrade
Grains
Corn and beans continued to run higher, but wheat broke a critical bull pennant and has an ugly chart. If wheat was the leader on the way up it should be the leader on the way down. Look for 5.05 to hold as resistance. If wheat closes back into the pennant the grain sector will go wild to the upside, but a confirmation move to new lows and corn and beans may fall hard. Rice remains a strong buy.
Meats
Cattle continued to fall as declining cash prices and huge inventories combined with over-the-top feed prices which will ultimately kill this market. More downside coming. Pigs look ugly too, as they held the top of their respective resistance points, but they haven’t turned long term bearish just yet.
Metals
When silver got back above $12, then gold closed above $613 I got a confirmed buy signal in these markets. I have spent the past year playing inverse correlations to the U.S. dollar (gold is priced in U.S. dollars) and a direct correlation to energies (inflation gauge) and neither of those two markets have panned out to be solid indicators. Now metals are bouncing as the dollar is flat and energies are weak. This market is running independent of all others and is seeing some solid buying demand on a global level. We are technically bullish right now in this sector, with the exception of copper which is a good fade against the rest of the sector. Platinum ran $140 in 4 days – and I ran away from this market in a hurry. It might be worth a look in a few days when the hysteria calms down.
Softs
Sugar turned bearish this week and is setting up for an ugly breakdown. This is a market that could just as easily be at 8 as it could be at 15 – and it could be there in weeks instead of months with the chart setup and the market volatility. Key support at 11.00 and 10.66 are the only things holding this market up. A break above 12.65 turns this market bullish in a hurry (12.08 as an early indicator). Cocoa remains a fundamental buy. Coffee is screaming a bull breakout – watch out $2, here we come! Cotton remains bearish despite the rest of the analytical world yelling buy. If we break and close below 48, the floodgates will open. OJ continues to trade extremely light volume and has the look of the silver market before we ran to $15. There are just no real sellers out there and specs and locals are buying the dips. Lumber is on key support above 257 and is worth looking at buying some deep out of the money calls.
*Disclaimer: There is risk of loss in all commodities trading. Please consult a James Mound Trading Group Broker before you trade for the first time. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some option strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. James Mound Trading Group, or anyone associated with JMTG or moundreport.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (clients or otherwise). Past results are by no means indicative of potential future returns. Information provided are compiled by sources believed to be reliable. JMTG or its principals assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the express written consent of James Mound Trading Group LLC.
Energies
A weak energies market bounced on Friday with some short covering ahead of the weekend, as fears of possible supply disruptions from Nigerian militants has the shorts taking profits. This bear flag is tough to digest fundamentally as winter heating oil demand is still in question and a ton of geopolitical concerns still hover over this market. Are we stuck with a long term over supply or is the market just offering us a much needed retracement ahead of another leg up on the next Middle East, Alaskan pipeline, Venezuela, Nigeria or terrorist crisis? I continue to recommend call buying in this downtrend. Natural gas is popping and could be a supply side indicator of what is to come in the energies complex, but the market must spike above 8.50 fairly soon to maintain bullish momentum.
Financials
The stock market exhibited weakness as flat to negative closes all week screams fund liquidation and profit taking in a market that broke a steep bullish channel. As I said last week, the market has likely seen the high on the S&P for the rest of the year with 1400 becoming key resistance moving forward. The jobs report showed the strongest numbers in five years and the market sold off on the news. Two months of strength in stocks brought huge dollars into funds. As they say, the individual investor buys at the highs and sells on the lows, and this money looks like it is chasing the profits. Bonds fell apart on the jobs number and appears to be ready to test critical 109-25 support on the 30yr., after which the market should have clear sailing to 107. The dollar needs to get through 85.88 to resume the bullish trend, and I see this recent 2 point pullback as a much needed retracement that sets up a run to 90. Don’t get caught up in the Canadian dollar’s micro-moves and look for a key break below 87 before jumping short. Take a look at some March deep out of the money Japanese yen puts.
http://www.traderslog.com/clip_image002.jpg
**Chart courtesy of Gecko Software’s TracknTrade
Grains
Corn and beans continued to run higher, but wheat broke a critical bull pennant and has an ugly chart. If wheat was the leader on the way up it should be the leader on the way down. Look for 5.05 to hold as resistance. If wheat closes back into the pennant the grain sector will go wild to the upside, but a confirmation move to new lows and corn and beans may fall hard. Rice remains a strong buy.
Meats
Cattle continued to fall as declining cash prices and huge inventories combined with over-the-top feed prices which will ultimately kill this market. More downside coming. Pigs look ugly too, as they held the top of their respective resistance points, but they haven’t turned long term bearish just yet.
Metals
When silver got back above $12, then gold closed above $613 I got a confirmed buy signal in these markets. I have spent the past year playing inverse correlations to the U.S. dollar (gold is priced in U.S. dollars) and a direct correlation to energies (inflation gauge) and neither of those two markets have panned out to be solid indicators. Now metals are bouncing as the dollar is flat and energies are weak. This market is running independent of all others and is seeing some solid buying demand on a global level. We are technically bullish right now in this sector, with the exception of copper which is a good fade against the rest of the sector. Platinum ran $140 in 4 days – and I ran away from this market in a hurry. It might be worth a look in a few days when the hysteria calms down.
Softs
Sugar turned bearish this week and is setting up for an ugly breakdown. This is a market that could just as easily be at 8 as it could be at 15 – and it could be there in weeks instead of months with the chart setup and the market volatility. Key support at 11.00 and 10.66 are the only things holding this market up. A break above 12.65 turns this market bullish in a hurry (12.08 as an early indicator). Cocoa remains a fundamental buy. Coffee is screaming a bull breakout – watch out $2, here we come! Cotton remains bearish despite the rest of the analytical world yelling buy. If we break and close below 48, the floodgates will open. OJ continues to trade extremely light volume and has the look of the silver market before we ran to $15. There are just no real sellers out there and specs and locals are buying the dips. Lumber is on key support above 257 and is worth looking at buying some deep out of the money calls.
*Disclaimer: There is risk of loss in all commodities trading. Please consult a James Mound Trading Group Broker before you trade for the first time. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some option strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. James Mound Trading Group, or anyone associated with JMTG or moundreport.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (clients or otherwise). Past results are by no means indicative of potential future returns. Information provided are compiled by sources believed to be reliable. JMTG or its principals assume no responsibility for any errors or omissions as the information may not be complete or events may have been cancelled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the express written consent of James Mound Trading Group LLC.