Weekly Outlook for Commodities from Odom & Frey

September 29, 2008

General Market Comments:

Commodities continue to be on hold……

Commodities continue to be on hold in terms of major directional moves while it too watches the socialization of America. We continue to expect commodities as a whole to resume the longer term uptrend. Bottom line continues to be the FED. creating more and more money every day and every time we have a crisis. Just like anything else, the more of something you have the less valuable it becomes. It is inevitable that the longer term direction for the Dollar is down. So we continue to buy dips in commodities that are priced in Dollars.

Energy Complex (NYMEX)

Crude Oil:

The crude oil market has put in a solid bottom below $100 and so long as those lows hold we are buyers of dips. The bottom line here is simple, as I already noted above Dollar denominated commodities are about to begin moving up again as our Dollar begins to fall. Also the underlying fundamentals have not changed. We are still using just as much oil as we ever have and we have yet to find any additional supply. Do not be fooled into thinking Crude oil will stay below $100. It may trade below that level a few more times but the likelihood of it staying below those levels is slim to none and slim is out of town.

Equities

SP500, DJIA, NASDAQ:

Stocks will stumble early this week but it will find a support level before the week is over. We expect the lows from a few weeks ago to hold in the near term and are therefore looking to buy into major dips back towards that support. Market is still gripped by fear but fear moves through the system very fast and that fear will ease as more and more about the “bailout” becomes know.

Financials

U.S Bonds:

Bonds continue to be the “safe haven” but before you get too cozy in those pitiful rates of return, realize what is happening. The government is going to take over all this bad debt so in a way that means even 30 T-Bonds will have at least some “junk bonds” inherently in them. Once the rest of the world who buys and holds these bonds, thinking that they are of the highest quality, will realize that almost overnight the FED is transforming that AAA paper to a junk bond. That being said we are still seeing signs that the current plan is not enough to stabilize things. If it is not, about the only thing they have left is another rate cut. If stocks get hit very hard in the early part of the week look for them to cut rates as a final act to try and stem the tide.

Metals

Gold, Silver, Copper:

I hope you took my advice seriously in the last issue when I said in no uncertain terms it was time to buy gold when it was trading at and below $775. If you failed to buy that recommendation I hope you listen this time. As gold pulls back you want to buy more. Again just ask yourself this simple question…is the economic climate better now than it was when Gold was trading above $1,000? If you answer yes then please send me what ever it is you are drinking, otherwise it is clear what you should do. Same goes for Silver.

Grain Complex

Corn, Soybeans, Wheat:

This week we are seeing the “harvest lows” put in. We expect these markets to begin turning back up in early October as harvest numbers begin to show less than the expected numbers. We would be buyers of calls on any breaks to new lows.

Softs (NYBOT)

O.J, Cocoa, Coffee, Sugar, & Cotton:

OJ continues to drift lower on the back of a benign hurricane season as far as the OJ crop is concerned. Near term we would look to buy long July 110 calls. Cocoa continues to trade within a more or less sideways range. We are buyers of ATM calls on dips below 2600. Coffee is still holding 130 and so long as it does on a closing basis we are buyers of this dip. Sugar is still range bound and is likely to remain so for some time. We are buyers of dips near the 1200 level. Cotton cannot seem to do anything but move lower. We expect that today’s low could turn out to be an island reversal so aggressive traders could look at buying ATM calls here as well.

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