It sure seems like everything in the news has been full of alarm bells lately due to Greece, China and falling oil prices in one form or another. Frankly, China’s impact on the US equity markets may be just the buying opportunity we’re looking for as several factors combine to point towards strength through the expiration of the September Dow Jones futures contract on September 18th.
Tough week in the markets as we generally got continuation where we were looking for rebounds. This led to a a pair of losers in gold and the Canadian Dollar against a winning trade in the stock indices due to their rebound.
We focused on two main themes this week. First, we looked at selling the Euro currency for TraderPlanet and followed it right up with a look at the Dollar Index on Tuesday for Equities.com. Meanwhile, our main piece focused on the grain markets ahead of Tuesday’s USDA Acreage Report.
It’s been an exceptionally confusing week to trade on a discretionary basis. Rarely can I recall a time when the markets have been more unsure of their next move. Fairly well every financial market has LOUD voices on both sides making good cases for their positions and their market forecasts. Between the FOMC meeting and the constant worry about whether or not or, when Greece will default has made picking a side based on theory and economics all but impossible. Despite this, we managed to remain fairly unscathed trading feeder cattle, Eurodollar and 30yr Treasury Bond futures; even a bit profitable.
We began the week with Bond market analysis for TraderPlanet. We looked at the tremendous and rapid build in the commercial trader position noting that the recent sell off may be nearing exhaustion. Based on Thursday’s reversal and ECB/IMF/Greek hope quickly deteriorating, we feel the short-term bang for the buck may be best on the long side of the market.
Tuesday, we focused on, “A Pause in the Yen’s Destruction.” We noted the rapid application of the Prime Minister and Bank of Japan’s plan to monetize their debt in a last ditch effort to reflate their economy. Like the Bond market, this market has seen tremendous and rapid commercial trader buying as the Yen fell to Y120 = $1.
Finally, we looked at the disconnect between nearby crude oil prices and current fundamentals. It’s hard to get bullish about supply cuts a year out when current inventories are the highest they’ve been in 80 years as we noted in the Energy Information Agency’s, ” Summary of Weekly Petroleum Data.”
Read – “Sell Crude Oil at $65 Per Barrel.”
We began this week with a big picture look at the natural gas market for TraderPlanet. Combining fundamental, technical and seasonal analysis, we suggest that this market will stay soft in, “Natural Gas: $2.50 Here We Come.”
Tuesday, we moved to the soybean market in our piece for Equities.com. We looked at the considerable commercial buying as this market has declined and noted that, as this decline has stalled, a good case could be made for a, “Soybean Short Trap.” July soybeans are $.20 higher since publication.
Finally, our primary focus was an update on last week’s inflation topic. This week, we examine entry level wage inflation and the competition between government subsidy programs and employers in, “What Inflation? – Addendum.” For what it’s worth, this piece is also traveling around the internet under the title of simply, “Entry Level Wage Inflation.”
This was a light week thanks to those who gave their all. Thank you to those we honor and support and kindness to the families they’ve left behind.
We began with the development of a classic small speculator short trap in the cotton futures market for Equities.com. We’ve been watching it build all week and finally issued an official COT Buy signal in our nightly discretionary email. Free Trial Available
Thanks in part to the lightened writing duties this week, I was able to step back and survey the markets as a mosaic. I find this exceptionally helpful in determining the big picture themes. In this case, we determined that these 9 charts are screaming DEFLATION. The world’s bankers may be trying talk rates higher but the boots on the ground are still mired in excess capacity and economic slack.
Another week of good calls with two out of three trades well in the money and the third is still hanging on.
We began the week by sending our COTSignals discretionary customers a sell signal in the Australian Dollar on Sunday evening. The market opened Sunday night at $.8026 to the U.S. Dollar and hasn’t looked back. It’s currently pushing $.7800, accumulating more than $2,000 per contract thus far. We detailed this trade for TraderPlanet on Monday in, “Aussie Dollar: A Commercial Trader’s Perspective.”
We only published twice this week as my attention was focused on bringing a new Commitment of Traders trading program online. The primary improvement in this version is its ability to lock into large moves and score the occasional big win as opposed to the statistically based days past entry exits we’ve employed for the last few years. I’ll share more after some time trading it on my own account to examine its behavior.
Back to the independent research that separates us from 80% of the commodity trading population. We began this week with a look at the consolidation in the gold futures market for TraderPlanet. We said, “We believe the recent shift towards a more bullish stance by the commercial traders could provide the spark for this market to breach the $1,225 resistance and….”(Yesterday’s high was $1227.7)
We looked at the recent commercial buying in the US Dollar Index on Monday, noting that, “Even though commercial traders remain heavily net short, their recent purchases have been strong enough to shift their momentum back to the positive side.” We also looked at technical support that has been tested and held, throughout this week.
You can find the full piece featured at TraderPlanet.
Tuesday was probably our best call. Equities.com featured our crude oil analysis in, “Crude Oil Spike is a Selling Opportunity.” We stated that, “our simple take on the way these usually work is that we’ll get one more spike of some type above the recent congestion that has built up. This morning’s trade near $61 is the spike we’ve been waiting on. ”
The market peaked Wednesday around $62.50 and has quickly fallen back near $58 per barrel.
We went macro with our own piece again this week as a follow up to, “The Interest Rate Conundrum” of two weeks ago. Originally, we focused on the world’s central bankers and the recent International Monetary Fund meeting in Washington. Their primary purpose was to discuss what it would take to US and global interest rates to rise and when. Apparently, Bill Gross had the answer and the markets listened in a BIG way. Even if interest rates aren’t your topic, the swings on the charts I posted are truly dramatic.