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The Weekend Commodities Review

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For the Week Ending June 28th, 2009

Mon, Jun 29 2009, 09:14 GMT
by James Mound Trading Group Team

James Mound Trading Group

Energies

On a technical level crude oil's choppiness from this week makes this a very difficult short term trading period. The support occurred above the June 3rd low and sets up a potential bull pennant, but the gut says don't buy the support. The market is likely to break the low from this week and head towards $63, bringing the energy sector as a whole down about 5-10% over the next several weeks. The root of the lower price forecast comes from three critical areas: a strong dollar, rising distillate inventories and a lack of hurricane activity early in the season. Rainy weather has hurt travel as well.

Financials

The stock market threatens a possible crash but holds on through bad news - sounds very familiar. This market is still showing two steps forward and one step back, and until there is a thorough downside move I recommend buying the dips. Bonds appear to have levelled off and are offering premium collection opportunities in the short term as it channels. The Fed is stuck and so are interest rates. The dollar continues to be a buy with shorts recommended on the euro, pound, Canadian dollar and peso. The yen is avoidable until it breaks the lows.

Grains

Time to fade the bean rally again. I recommend an inter-market spread with 1 short bean, 1 short bean meal, 2 long wheat and 2 long corn. The charts show corn and wheat plunging and a supportive bean market, but this time of year screams choppy market ahead. Strong support in corn exists above the March 6th low and the same goes for wheat on March 3rd. Rice remains avoidable. Grain stocks and acreage report on Tuesday should shift momentum in wheat and corn.

Meats

Time to yank the long recommendation on cattle even if there is still some additional potential upside. Hogs remain a sell with more downside ahead.

Metals

As if gold didn't have a enough reasons to selloff with a resumption of the dollar rally and strong technical resistance below the contract highs, now the IMF is about to unload 400+ tonnes of gold onto the market. You can argue the IMF gold will not be directly sold on the open market, which may have some truth, but the reality is supply is supply is supply. Silver has little reason to stay up here at these prices despite a disproportionate drop in prices when compared to gold. Copper remains a sell along with platinum. Palladium is a strong buy on a break above 270.

Softs

Coffee is a value buy between 112 and 119. Worse than anticipated supply from Columbia should help to create a base here despite dollar strength. Sugar is continuing to surge as India supplies are drastically lower than recent years and possibly just slightly more than half of last year's crop. Cocoa should continue to collapse as sellers jump on a rising dollar and an end to the Ivory Coast strike. Wet weather there may create some temporary support. Cotton is a buy on dips. OJ is a value buy with November calls. Lumber is on target for a move to 250 and possibly up to 270 in coming months.

06-28-2009

Published on  Mon, Jun 29 2009, 09:20 GMT