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The
Weekend Commodities Review
By Head Analyst
James Mound
For the Week Ending
September 14th,
2008
Energies
Despite the Texans having to move their football game
with the Ravens to November, there was a lot of grateful Texans after Ike
passed through with less than anticipated devastation. Oil supplies will experience a bit of a
drop, mainly in distillates, but this storm sets up yet another pullback in
oil prices this week. Expect 92.70 to
get tested fairly quickly and ultimately for the market to support out
between 88 and 93. Natural gas will
also see a bit of pullback that should be bought into with bull call spreads. It is also a good time for a long heating
oil short rbob spread (1 to 1).
Financials
So Merrill Lynch dropped the bomb this weekend with a
buyout from Bank of America coming on the heels of a Fed intervention of
sorts. The stock market is running on
zero consumer confidence and now has zero fund manager confidence to
boot. This may get a bit ugly in the
short term but let them wash out the faint of heart because the market is
near a bottom. Bonds should take it to
another level but be tempered by the Fed meeting on Tuesday, which is setting
up a big turnaround in both stocks and bonds.
The dollar is riding high but is about to turn south in the near term,
sparked by Friday’s strong euro rally.
Look for a move down to 77 before jumping long once again. The yen is trading almost entirely against
the carry trade so look for some selling pressure as bonds turn south and the
stock market rallies in coming weeks and months. The Canadian dollar is due for a bounce,
but it will likely be short lived as the ultimate market move is probably to
82, albeit a year or two from now.
Grains
A bullish wasde
and crop report set up a nice limit up move in corn on Friday and solid
bullish action throughout the grain sector.
This sector is likely to rally in coming weeks, especially during a
critical harvest and weather period. Target
bull call spreads in corn and wheat, but shy away from beans as they are a
bit overpriced at the moment.
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Meats
A rally in grains is likely to
setup a bull swing in cattle prices over the next few weeks So take off the shorts and reverse
this market sector to bull side in the short term with straight calls.
**Chart
courtesy of Gecko Software's TracknTrade
Metals
My targets of 740 in gold and 11.00 in silver were
essentially hit last week and these two markets are a value buy in the short
term as the dollar is expected to pullback.
Straight call plays are too pricey so look at long term wide bull call
spreads in both markets, about 50% away from the current price with 12 months
or so of time.
Softs
Cocoa
is holding a bear trend despite an ongoing strike in the Ivory
Coast and poor quality beans arriving at
port. This sets
up a bear break once the strike ends and puts are recommended on up
days. Coffee is having a tough time
breaking out as rising supply estimates for the 08/09 crop hold back the
bulls. This market will continue to
see short term pressure if oil falls further.
Buy the dips with long term bull call spreads. Sugar remains choppy and bearish as oil
falls and India
cash prices continue to falter. Expect
the market to offer a final shakeout and then turn bullish as corn makes a
harvest time rally. Cotton caught a
strong bid on the crop report from Friday and should see substantial gains in
coming weeks and months. Futures with
put protection are recommended at this value entry price. OJ remains a value buy despite ugly technicals.
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