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The
Weekend Commodities Review
By Head Analyst
James Mound
For the Week Ending
June 29th,
2008
Energies
A breakout to the upside off a consolidation pattern in
crude – what’s new? The market
momentum after a fairly bearish inventory report comes off of continued
geopolitical fears and just general bullish hype by the media. Dollar weakness also contributed to a rise
in the energy sector this week amid blowback on an inept Fed and its lack of
action. Expect a washout of the shorts
on a flair up but expect the market to hold well
under $150 as that mark has about as much of a psychological resistance as
$100 did. Avoid naked option selling
but some ratio call credit spreads might be worth the risk on a short term
basis. Natural gas is offering a good
setup for a intermediate term bear put play.
Financials
Stocks took a hit this week on a poor Fed move and
general bearishness towards the economy. The test of 1280 came as expected and, while
the market seems like it is heading to zero, I would still expect a bounce
early on this week. Bonds scorched
higher and broke a bear trend but remain range bound, thus setting up some
premium collection opportunities. The
dollar could not hold momentum and my long term bullishness, while still
intact, is going to have to be sidelined for a minute while this market works
out the kinks in the short term. The
euro and Canadian dollar held critical supports but I suspect a retest of
those areas sometime in July.
Grains
Price expansion continued in the grains this week as the
dollar weakness and oil rise helped to keep prices flying high. The Fed’s meeting is starting to impact the
market as well. Low rates mean
inflation and that means higher commodity prices. Look for the Fed to support the dollar this
week and push grain prices south for a while.
This all gets put on pause on Monday as the annual acreage report comes
out showing the state of the grains, along with current grain stock
numbers. Keep an eye
on Australian weather affecting the wheat market as dry weather puts pressure
on the crop. Straight puts will play a
wicked call skew in this sector, with a focus on beans and corn, and offer a
solid premium spike on a price correction in coming weeks. Rice is on its way to 1450.
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Meats
Cattle
continues to rely on grain price movement to determine its trend. Expect some selling this week following the
acreage report. Hogs continue to be in
a wide range with premium collection plays recommended.
Metals
The bounce in the euro and oil
markets gave gold all it needed to say see’ya later
to 850 support and head up towards a critical area
just under 950. I expect a metals pullback
this week as the dollar recovers in a choppy market. Copper remains a sell along with platinum.
**Chart courtesy of Gecko Software's TracknTrade
Softs
Coffee is getting a technical
boost following some real inventory and supply fears out of Brazil. Market volatility could get a little crazy
so avoid exposed naked positions. Buy
the dips. Cocoa is about turn so don’t
get caught trying to catch the last bits of this move. Cotton is up for grabs after setting a top
and bottom and now trading in between ahead of the acreage numbers. Cotton remains a buy with some patience
because it may take until harvest to see this materialize. A ratio call spread is recommended to play
some lopsided premium. Sugar is
holding on as corn sustains itself at these levels. Sugar is stuck in this correlation for now
and if corn is going to turn this week it will likely take sugar with it. OJ remains a buy on value and seasonality.
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