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The Weekend Commodities Review
By Head Analyst
James Mound
For
the Week Ending June 28th, 2009
Energies
On
a technical level crude oil’s choppiness from this week makes this a very
difficult short term trading period.
The support occurred above the June 3rd low and sets up a
potential bull pennant, but the gut says don’t buy the support. The market is likely to break the low from
this week and head towards $63, bringing the energy sector as a whole down
about 5-10% over the next several weeks.
The root of the lower price forecast comes from three critical areas:
a strong dollar, rising distillate inventories and a lack of hurricane
activity early in the season. Rainy
weather has hurt travel as well.
Financials
The
stock market threatens a possible crash but holds on through bad news –
sounds very familiar. This market is
still showing two steps forward and one step back, and until there is a thorough
downside move I recommend buying the dips.
Bonds appear to have levelled off and are offering premium collection
opportunities in the short term as it channels. The Fed is stuck and so are interest
rates. The dollar continues to be a
buy with shorts recommended on the euro, pound, Canadian dollar and
peso. The yen is avoidable until it
breaks the lows.
Grains
Time to fade the bean rally
again. I recommend an inter-market
spread with 1 short bean, 1 short bean meal, 2 long wheat and 2 long corn. The charts show corn and wheat plunging and
a supportive bean market, but this time of year screams choppy market ahead. Strong support in corn exists above the
March 6th low and the same goes for wheat on March 3rd. Rice remains avoidable. Grain stocks and acreage report on Tuesday
should shift momentum in wheat and corn.
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Meats
Time to yank the long
recommendation on cattle even if there is still some additional potential
upside. Hogs remain a sell with more
downside ahead.
Metals
As if gold
didn’t have a enough reasons to selloff with a resumption of the dollar rally
and strong technical resistance below the contract highs, now the IMF is
about to unload 400+ tonnes of gold onto the market. You can argue the IMF gold will not be directly
sold on the open market, which may have some truth, but the reality is supply
is supply is supply. Silver has little
reason to stay up here at these prices despite a disproportionate drop in
prices when compared to gold. Copper
remains a sell along with platinum.
Palladium is a strong buy on a break above 270.
Softs
Coffee is a value buy between 112 and 119. Worse than anticipated supply from Columbia
should help to create a base here despite dollar strength. Sugar is continuing to surge as India
supplies are drastically lower than recent years and possibly just slightly
more than half of last year’s crop.
Cocoa should continue to collapse as sellers jump on a rising dollar
and an end to the Ivory Coast strike.
Wet weather there may create some temporary support. Cotton is a buy on dips. OJ is a value buy with November calls. Lumber is on target for a move to 250 and possibly
up to 270 in coming months.
**Chart courtesy of Gecko Software's TracknTrade
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