Comments:
Commodities continue to be strong but the bull is showing signs of exhaustion in many areas. After exploding to the upside, grains as a whole have been unable to maintain those high prices. Gold too has been unable to push through recent highs. We are in no way saying that the bull in commodities is over, far from it, but we are alerting readers to the extremely high prices currently being paid for just about anything. New longs in these markets should keep trailing stops with the market as we continue to warn of a sharp correction to come…
Energy:
Crude oil has now broken out above $95 on the back of Chavez following through with his threats to stop exporting and renewed fear of a production cut at the next OPEC meeting, both things we told readers to expect last week. We now see crude oil at least testing the psychologically important $100 level. We do not advise readers to chase this market but those who took our advice to go long in the last few weeks should now have 1/3 of your stops working at breakeven 1/3 working below 95 and 1/3 trailing the current market by $50.
NG:
Natural gas has hit our target from last week at 8.75 and we have now exited our longs. We see significant resistance above 9.00. If that holds we will look to short later this week.
S&P:
The S&P was quite last week compared to the last two months. The market attempted to stabilize and we do see it stabilizing more this week. We are still looking for a retest of support near 1310 and advise readers to buy that dip if and when it comes. Buy at the money calls to manage the risk effectively.
Bonds:
Bonds broke through support last week and once that level was broken we saw a fast fall. We are now testing support near the 116 handle. We see 116 being broke and then test of the stronger support level at 114. Look for bonds to begin to trend lower as more and more people become concerned about inflation.
Metals:
Gold is above $900 again but so far has been unable to break out above the recent highs. We do not expect this market to make it through those levels in the near tem and are therefore sellers of rallies over 925 with stops at or above 955. Our target is a move to at least 875 and most likely 850. Our stops in silver are now working at 1769 and we are still targeting a move to 1625 by months end. Copper is now testing our resistance level mentioned last week at 375 we see this level holding in the near term we advising those that took our long entry recommendation to exit or at least move in a protective stop.
Grains:
Grains did pullback a bit last week, the only real exception being soybeans. This week is starting off with what looks like a classic “dead cat bounce.” We are looking to sell into this bounce and or buy puts. We see grains pulling back into the middle of next month. Be careful as volatility is boiling over as it so often does at tops. This means that buying puts instead of outright shorts is the “safer” bet.
Softs:
OJ stopped us out but we are reentering longs at 1.25 basis May with stops below 1.20. Cocoa has put in a near term top and we are shorting May above 2500 with stops above Friday’s highs. Coffee is trying to follow through but near term we see May stalling before it trades above 160. Exit longs and wait for pullback to reenter. Sugar has been stronger than expected. We are buying May 13.50 puts and holding. May Cotton found and held support above 68. We are looking to sell rallies over 72 and look for a retest of support.�
