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The
Weekend Commodities Review
By Head Analyst
James Mound
For the Week Ending
June 22nd,
2008
Energies
Energies stalled this week as a trend changing inventory
report coupled with some profit taking created a pennant near the highs. Is Israel about to wage war on Iran or are they just flexing their military might? Technically the market setup a bear move
when it broke out of the pennant congestion to the upside earlier in the
week, but the intraday selloff ultimately turned
the pattern right back into consolidation mode. $3 price moves in crude oil should be the
daily norm and the likelihood of even larger price expansion and volatility
is very high. Option premiums are through
the roof, but only the foolish would naked sell in this environment. Instead look at long condors or bear
spreads with lots of time to expiration. Straight Dec. 85 puts also could get a solid
premium spike on a volatile selloff.
Financials
Stocks continued south as expected and should test the
1280 mark very soon despite some choppy action anticipated this week. Bonds also remain choppy and worthy of
premium collection. The dollar’s
breakout above 74 needs to get some follow through shortly or all momentum
will be lost. The euro and Canadian
dollar held key supports and the market does not seem ready to move out of
this area just yet. Long term I remain
a dollar bull and bearish the Canadian dollar on a break below 9675. The euro and pound a good
shorts but all these markets should be played on a long term trend
because it is unlikely the short term will paint a clear trend.
Grains
Grain volatility is getting back to some impressive levels, but I believe
the action has just begun to expand. Corn
ethanol subsidies are all but over and the market is going to get hurt by a
dying meat and dairy industry. Can
this market push higher through summer with all this flooding behind us? The bottom line is hysteria is here and it
won’t last long. I warn you not to get
caught long waiting for the last few pennies of a rally gone way too far way
too fast. Run for the exits and take
your profits, and maybe use a few bucks for some ratio breakout put spreads
in corn or beans.
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Meats
Cattle is
at impressive levels as rising grain prices push the upper limits of meat
prices. Get short with puts across the
board as the grain squeeze is on and won’t last very long.
Metals
Gold and silver got some price
support as gold held above 850 and the dollar pulled back off the highs. This pattern suggests some congestion or a
bull run in the market over the next two to three weeks, but I am in the camp
of the bears a the long term trend reversal in the U.S. dollar is real and
will hurt the metals in coming months.
Take any rally as a value short entry with some December puts.
**Chart courtesy of Gecko Software's TracknTrade
Softs
Coffee exploded through
resistance on Friday as frost fears and crop inventories in Brazil
have traders in panic mode. This
remains a bull market. Cocoa
is overextended and should see weakness as Ivory
Coast President Gbagbo
arrested key players in a group connected to illegal cocoa trafficking over
the border. Cotton is reeling after
failing to follow through on a major price surge, but it is likely to
consolidate in the near term as West Texas crop issues
are evaluated. Sugar is riding the
ethanol coattails of corn and could turn south in the near term as corn is
likely topping. OJ is still a value
buy at these levels.
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