Commodities continue to be mixed though we are nearing a point in the summer where we are expecting a bit of bounce to come across most of the commodities markets. In particular we are looking for both Grains and Energy sectors to stage a brief rally in the weeks ahead. We are not calling for a resumption of the uptrend, but a bounce back up to retest some of the recent highs is in order. We still expect the Dollar to continue to stabilize.
Crude Oil:
Crude oil has managed to stay down for a week giving the bulls in the stock markets a reason to breathe a sigh of relief. We are in no way out of the woods yet as far as the price of oil is concerned but this pause, if that is all it is, is welcome to say the least. We are buyers of this dip for the near term as we still feel there is more that can cause the price to rise than fall on the horizon.
Natural Gas:
Our first round of buying was stopped out but we are still biased to the long side this week as we expect at the very least a dead cat bounce to bring prices back above 10.
S&P500:
Since bouncing off of the lows, the market has struggled to maintain that upside bias. We are confident that in the sort term it will in fact follow through. We are therefore buying major dips this week and holding those trades into next week and beyond. Again we are not expecting anything other than a short term sucker rally so do not get sucked into this unless you plan to exit quickly and soon.
U.S. Bonds:
Bonds staged a bounce as stocks stumbled but we expect Bonds to continue moving lower so we are using this rally to initiate more shorts. We continue to target a move to at least 112 before we see 118.
Metals:
Gold has pulled back to 925. We are expecting continued choppy trading in metals in the near term. We see strong potential for Gold to dip below 900. If this happens we advise buying with both hands as we suspect the days of triple digit gold prices are numbered, soon to be replaced by four digits. Gold is the only “real” money left on the planet, and while the masses have not yet figured that out, those “in the know” have been quietly accumulating gold all the while our and other Central Banks have been printing there soon to be worth less currencies. Every person who has ever taken an economics class(except Mr. Bernanke of course) knows that the main driver of any market is supply and demand. If you increase supply with out an increase in demand the price of that asset will go down. Mr. Bernanke in his infinite wisdom believes in a more advanced school of thought. In Bernanke land you can increase the supply of money and then simply stop publishing M3 and say that it is no longer “economically relevant” and then simply lie from there about how much supply there is. Once you have convinced the world of your lie you have saved the US from having to actually pay its debt. It is pure genius. The problem is that there are enough people like myself, and hopefully you who is reading this, who know how much they are printing. Our “on budget” (if you too are wondering: “if this is on budget then what is off budget that we do not know about” then you are just beginning to see what is really going on here) National Debt is in excess of nine and a half Trillion (yes you read the right, that is Trillion with a T, four commas and 12 zeros behind the 9!) Dollars! The bad news is it is increasing by 1 Trillion every 15 months. If debt is doubling every 15 months it is only due to the massive increase in supply of that debt that is allowing it. How does our government allow itself to simply create debt out of thin air? Simply by printing more money and since we as citizens of this “free” country are not in control of our currency there is nothing we can do about it. That rather important duty was “privatized” years ago. Many of you will be surprised to learn that the so called Federal Reserve is not a government institution at all but rather a private enterprise. Tomas Jefferson put it best in 1802 when he wrote a letter to the then Secretary of the Treasury Albert Gallatin that said:
If that is not as fitting today (if not more so) than it was more than 200 years ago then I do not know what is. Bottom line is this, do not trust your government, only a fool would follow a fool and only a fool would go to Washington. Every time your government tells you not to panic it is time to panic. In that fit of panic I suggest you buy gold or wish you had later.
Grains:
Grains have begun to turn back up and near term we are buyers of beans. We are looking for Beans to run back up to 15.00 or so before becoming a sell again. We are not so much bullish as we are lacking bearishness. Corn has also found support near the 550 level and we suspect that support will hold for the near term. We are also buyers of corn with stops below 545. Wheat is also putting in a bottom between 750 and 800. We are buyers of dips below 800 with stops below 745.
Softs:
Oj continues to trade in a manic depressive way based on hurricane forecasts. Now that we are back down near the 110 level we would look to be light buyers with stops below 105. Cocoa has ended its slide and we are now expecting another run up to 3000. We are buyers near 2800 with stops below 2700 while targeting a move at least above 2900. We remain cautious buyers of dips in coffee and stops are still running below 132.50. Sugar is now a buy as close to 12.00 as you can get it with stops below 11.00. This could turn out to be a long term hold so if you trade this market do not expect immediate follow through as this market tends to lag other commodities by a wide margin. Cotton is trying to get a rally going again and we believe it will again trade above 75 in the not too distant future. We remain buyers of dips with stops below 67.50.
