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General Comments
Due to the upcoming Labor Day
Holiday Weekend there will be no Weekend Review next week. Please have a happy and safe holiday
weekend!
Energies
Crude oil’s end of
the week rebound should be short lived and ultimately seen as a mild bump
on the road to fresh near term lows.
Target $64.50 in the near term, confirmed by a break below 71.24 on
the Oct. contract this week. Heating
oil and rbob both appear ready to collapse a solid 15% in coming weeks if a
Gulf hurricane does not occur. The
forecast was for an active season and the bottom line that is not coming to
fruition, so all that excess premium is going to evaporate and shorts are
going to come back into the market with confidence. Natural gas is ugly and this is a wash
out, offering good long term call buying opportunities on the way down.
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Financials
Stocks appear stuck
in a relative mid-range but this is likely just the calm before another
storm. Look for put spread buying
opportunities on bounce days. Target
shorts between current levels and 1084 on the S&P. Bonds should selloff during a week of
calm heading into the employment report on Friday. The Friday report could be epic as the
buildup to the employment outlook, recent surprises and shocking prior
month revisions all setup massive volatility for the stock market, bonds
and currencies. The kicker is the
holiday weekend it falls on, a major trader vacation weekend that could
cause a big Friday and Tuesday reaction in the financial sector. Until then I expect bond prices to
retrace to 130 or so. The dollar
remains bullish in the near term, pressuring the euro and pound in the
process. The Canadian dollar might
catch a bounce here, and if it does I would look to short at 97. The Aussie recovered well after the
election concerns of last weekend and I suspect there is bullish momentum
that could push the market to 9150, at which point I would recommend
shorting it. The Bank of Japan eased
monetary policy this evening in an effort to limit the yen’s runaway move
agains the dollar. This is all part of the show as they have little choice
but to intervene as Japan is an export driven economy. I fully anticipate that Japan will
undergo major economic changes over the next two years and a strong yen
will be the catalyst. If they
continue to try and ntervene it will net out to be bullish because the BOJ
will show their inability to sustain control over this runaway currency,
and if they are just ‘talking the market down’ it will comeback with
vengeance – either way I recommend buying the dip as the yen remains
bullish, offering a quick recovery from the Friday pullback. This is likely the last real pullback
before a short covering rally ensues that could be historic. I continue to stand by my forecast that:
The
Japanese Yen futures will hit 140 before 80 or I will quit writing the
Weekend Commodities Review…forever.
Grains
After a careful
technical review of the grain sector this weekend I believe all eyes will
be on wheat as a leading indicator to the grain trend. This market is offering a near perfect pennant
consolidation off the post Russian wheat ban highs, and looks bullish on a
technical level. My gut says don’t
believe it for a second! Let the
market fake breakout this week and sell into it with puts. The grain market is setting up an
impressive head fake rally this week that screams put buying opportunity in
beans, wheat and especially corn.
Rice remains the standout long term buy, but overall that market
will be trapped inside a grain selloff.
A fake out rally into a big selloff may not be what you want to
hear, but I strive to never hold back my opinion and to always call it like
I see it – right or wrong. In this
case I have some specific ways to play this forecast and subscribers to my
Mound Trade Signals service will get a trade recommendation this week on
this prediction. Sign up at www.moundtradesignals.com and
get the report for as little as $80 a month.
Meats
Cattle has likely seen a turning point as the
overbought market conditions and skewed cash prices have turned bearish on
some hedgers selling to lock in some seriously overpriced meat. Hogs also showed signs of a meltdown
ahead and the meat sector as a whole is strong sell.
Metals
Timing in metals has unfortunately not been my strong
suit in recent years, and last week was no exception. The setup remains, however, for a strong
price decline in silver and gold with significant volatility expected in
both markets heading into and following Friday’s jobs data. Copper is testing some critical
resistance levels and a short futures play is recommended with a stop at
342.
Softs
Coffee hit my 170
target – in a hurry – and supported out shortly thereafter. The ensuing rally leaves Monday as a
critical momentum indicator day. The
market must close above Friday’s high to sustain bullish momentum, after
which the skies the limit. Cocoa
broke through critical support and represents a strong short with puts or
futures with stops above 2820.
Cotton set a strong reversal pattern on Friday with the highs from
Friday being a perfect area for stop placement on a short futures. Expect a mild retracement with a buying
opportunity near 83. OJ is setting
up an impressive failure on a break below 133, although this market is
notorious for a stop triggering technical failure that has no follow
through, so look for a break to 133 but wait one more day for a fresh low
closing price to confirm the failure.
Sugar is a sell with puts as volatility is picking up steam. Lumber remains a buy.
Past performance is not indicative of future results.
**Chart courtesy of Gecko Software's TracknTrade
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