|
General Comments
Continued selling in the stock market has helped spawn
a breakout US dollar rally and pressure commodity prices further. Winter storms or not, the oil sector
took a nosedive on what should be perceived as both U.S. and
global economic weakness – something I forecasted and continue to anticipate
throughout much of 2010. The
question heading into next week is whether the market will stabilize and
the short answer opinion is no. Of
course rarely, if ever, does any market move in a straight line, however I do not believe this is a slide but
rather a crash just starting to gain momentum. Market sentiment still has room to
become more bearish and the dollar has a lot of technical room to rally
further. The Superbowl will likely
have the only Saint the stock and commodity markets will see for some
time as a winter collapse continues.
Energies
Velocity of decline is important to what the oil
market experienced last week. It
has been quite some time since $3 moves became commonplace in this market
and it is a sign that the market is getting very bearish very
quickly. It is also an indicator
that the intraday bounces could offer shocking volatility but not
necessarily be a real indicator of a bullish reversal. The larger the plunge the more
impressive the upside fake-outs tend to be. That being said, use
the bounces as entries for bear put spreads. Natural gas remains a solid long
against a short crude or heating oil and I
continue to recommend long rbob against a short
heating oil as inventory problems likely lay ahead for rbob come May.
Financials
Stocks continued to thwart any bull attempts to
stabilize this collapse, and in my opinion traders haven’t even seen the
real collapse yet. It is time to
get out of the way if you are a bull and jump on this short wagon. Put premiums have bounced on an
expanding VIX but remain a relative value in my view due to the potential
for more expansive downside moves in the near future. The VIX tends to shrink on two consecutive
flat to up trading days so use that as a good straight put buying or
synthetic short entry opportunity. Bonds remain a buy on dips. The dollar exploded to fresh near term
highs and is on the path higher that I have been preaching for
months. I continue to standby my
prediction that:
The dollar will hit 86 before it breaks below 70
or I will stop writing the Weekend Commodities Review... forever.
For some of you that have followed my report for some
time, you might notice what appears to be a
bearish Mound Ladle Formationtm in
the dollar, but in fact it is not a rounded bottom which is a defining
characteristic. Instead you are
looking at a strong v-shaped rally (meaning more vertical on the rally
than the selloff part of the V) which is about to approach resistance
just below 82, but may have the momentum to continue on through that
point in a very short period of time.
The yen remains a strong buy on dips, with a critical bottom
likely already set. The yen has a
shot at a 1000 point move up for the month of February based on my
analysis. I remain bearish the
Aussie, euro, pound and Canadian.
The Aussie got that stop-triggering plunge I was looking for and
the 300 points took more like a week than 2 weeks, but I would not assume
the selling is over just because it hit my first target. Look for a little bounce, if any, and then
more downside to 84.
Past performance is not indicative of future results.
**Chart courtesy of Gecko Software's TracknTrade
Grains
Grains continue to feel the pressure of strong supply,
declining expectations for global demand, and a strengthening dollar
weakening exports. Soybeans are
approaching critical support but outside of a 30-40 cent bounce I am not
seeing much upside off that support. There is not much to say here folks
except sell the bounces and expect more downside volatility than what is currently
priced into the OTM puts. Rice
remains a bear play with puts.
Wheat continues to offer a different fundamental and technical
outlook and I recommend buying wheat against a short corn or soybean.
----------------------------------------------------------
Sign Up To Receive This Report Every Weekend for
FREE – Click Here!
---------------------------------------------------------
Meats
The cattle fake-out from the
week prior was not a huge shock but this spike rally should be sold into
as long term this market is likely heading to 75. Hogs continue to offer the same trade
setup as mentioned in last week’s report with a week’s worth of support
to justify the trade further. So
to repeat the trade: Hogs are at a critical juncture as 65.50 on the
April contract - and that is all the technical inputs I need for a
forecast. Short term I recommend a
swing trade by buying it here with a double reversal stop at 64.40,
suggesting a clear break below key support and a bearish outlook for
weeks or months to come. If the
upside holds target 68.40. If
stopped into the downside reversal play then place a protective stop at
69.30. I know I rarely give
specific trade recs in this report, and if you
want follow up on this trade or more trades like this then I recommend
getting my premium trade rec service www.moundtradesignals.com –
it’s my ultimate outlet for communicating my actual trade recommendations
in a clear and concise format.
Metals
This past week the market
got a glimpse of just how quickly gold and silver are capable of
collapsing. Silver’s history of
trying to get ahead of the gold curve shined through last week as the
market plummeted on fears of gold’s collapse. The dollar is strong and the trend
change is making a lot of bulls take profits, possibly triggering stops
on the way down. The gold bugs and
bulls will of course see this as a buying opportunity but they should be
weary of jumping in too early - $850 gold is my target. Copper remains bearish on a declining
global growth outlook and general producer selling.
Softs
Coffee is a showing some
minor congestion right where I expect it to support out and quickly race
to 150. Cocoa has come off the highs
significantly and I see almost a straight shot down to 2400. The OJ market is tricky as it obvious
the crop is not in great shape but to me it’s a buy the rumor sell the
fact market and that means the highs are in and the market is likely heading
to 110. Sugar remains a buy on
dips with call options, but overall this market maybe has a shot at
running to 35-38 then crumbling.
Cotton continues to be a value buy on dips in a shrinking supply cycle.
|
