Squawk Box Europe – Bill McLaren

LET’S LOOK AT THE S&P 500 INDEX DAILY CHART

There is a chance, a probability for a high today or Monday. When the July “False Break” low was hit I indicated three probabilities. A new leg up running to a minimum 1247 in 90 to 99 calendar days, a secondary high or fast rally that exhausts before a new high usually 7/8 of the range down in 60 to 65 calendar days. Or a lower double top and this is where the index is now located. So as the index moves into these time window we need to look at the wave structure, volume, price level and the pattern of the trend to confirm the probability. The index is at the “OBVIOUS” resistance of the previous high and now within the time window at 180 days.

There is a 5 wave structure up (5 or 3of 3), volume has been decreasing but not unusual if the trend were up at this stage, but the pattern of trend is not setting up well. Notice how small the daily ranges have become. High points and tops tend to have some volatility. Notice the expansion of ranges during the January top and the April top and in this case the ranges are narrowing. If there is a move down it is possible to see just one to three days down and resumption of the trend due to the resistance being “obvious.”

Running out cycles from the July low has 45 days on the 15th and if a low could indicate a 90 day move up. If this is a counter trend rally in a down trending market the highest probability is to run out 60 to 65 days or out to the first week in September. If there is a high point now it should not exceed 1134. I don’t like the odds for a top due to the small range days and the probability the move down could be a small counter trend down. The small range days leaves a possibility of a large spike up. If today can not advance following yesterday’s reversal up and a daily low is broken I’ll consider a short term move down to trade but I doubt the trend reversal. I hate those small range days as it usually indicates support coming in at high levels and an exhaustion up might be necessary to eliminate the buyers.

GOLD

The two weeks ago I said gold would go to 154 to 157 for a low at 50% of the last leg up. We are now looking for this rally to fail and confirm a downtrend into one of the major support. The move down to 50% of the last leg up to consolidated that leg up. I felt the entire trend since 2008 needed to be consolidated so we are looking for this rally to fail and run down to ¼ of the major range which is the minimum move down to correct or consolidate a major trend or 1122. Once gold establishes a downtrend there is a fast rally as occurred in this uptrend as noted with arrows and this occurs in almost all up trends. So we are looking for evidence this rally will fail at a price above 1212 and possibly on the 12th of August at 1220. If the index runs past 12 trading days there is no high in place and a new high is likely. The pattern of the downtrend was weak so we need solid evidence to conclude a lower high is in place. But that is what we are looking to occur.

Source: McLaren Report

Weekly Commodity Update

China once again showed its importance as another attempt to rein in lending led to selling of commodities and a switch to the perceived safety of government bonds and the dollar.

Commodity prices fell to their lowest levels this year as China took fresh measures to cool its galloping growth. Banks were temporarily told to halt lending in an attempt to reduce the frantic levels of activity during the first few weeks of 2010. Given Chinas and other emerging economies importance in driving commodity prices this move had an adverse impact on markets from oil to metals.

The CRB commodity index which one week into January trading showed a gain of 4 percent have since then been struggling and this week moved back to levels last seen in December 2009 and thereby putting a lot of new established long positions under pressure. Technically the uptrend since March 2009 is in danger of being broken so the next few days will be very important in deciding the near term direction of commodities.

Another piece of bad news has been the renewed strength of the dollar, especially against the Euro, which fell to a five month low this week over continued concerns about Greece’s fiscal problems. The speculative positions recently have heavily been favouring a weaker dollar and this turnaround has forced a lot of selling in order to limit losses.

Stock markets could be the next focus point as Presidents Obama’s proposed overhaul of the banking sector saw equity markets falling through previous support levels. Five failed attempts to crack the USD 1,150 resistance level on the S&P 500 index was followed by a drop through previous support at USD 1,130. This has now opening up for a potential move back towards USD 1,085.

Crude oil for March delivery reached a low at USD 75.6, a 10.50% drop from the recent highs. On top of the factors already mentioned the speculative long position in crude had reached a new record high leaving the market exposed to stop loss selling while OPECs compliance in adhering to agreed production cuts continue to slip.

Adding all these up energy prices had to come lower but considering the amount of unfriendly news prices have held up pretty well. Continued range trading around USD 80 seems to be the most likely trading pattern going forward.  For now though it is pretty clear that commodity markets are not ready to decouple from the dollar and the moves there has to be watched closely.

Technically near month crude is in a wide USD 73 to USD 88 upward sloping channel and the month long uptrend is still intact. Additional support can be found at USD 75.25 being the 100 day moving average while resistance is located at USD 77.80 followed by USD 80.70.

Platinum raced to a 12 percent gain this week before selling drove it lower from overbought levels. The dramatic rise seen so far has been due to the January 8 successful launch of a Platinum ETF. To keep up with demand this fund bought 195,000 ounces of platinum during a ten day period, more than 10 times daily global production. Platinum is primarily used in jewellery and catalytic converters in autos and China has again been mentioned as a reason for buying it given the forecast for 17.2 million new cars on the road this year. Look for support on the April contract at USD 1,515 to hold for now.

The gold market also got caught by the resurgence of the dollar dropping back towards the December lows at USD 1,075. Support was found at 100 day moving average at USD 1,086 ahead of USD 1,075 and the crucial trend line support at USD 1,060. The bull market for gold is still intact and the fundamental factors that have been driving gold are still there but for now the dollar is in the driving seat so we have to advise caution on gold for the next few weeks. Relative value trades like gold/silver or gold/platinum ratio trades should perform pretty well during this correction

Commodity Futures Snapshot

The green zone represents between 2 standard deviations above and below the commodity’s 50-day moving average, and moves above or below the green zone are considered overbought or oversold. 

As the dollar has risen in recent days, most commodities have pulled back quite a bit.  As shown, oil has pulled back sharply from the top of its trading range to the middle of its trading range.  Gold and silver have moved down to the bottom of their trading ranges, while corn and wheat are now below the green zone.  Platinum has also pulled back, but it’s still closer to the top of its range than the bottom.  Natural gas hasn’t gotten hit as hard as other commodities, and it is actually up a bit today.

Source: Bespoken Research

Commodity Snapshot

Below we highlight our trading range charts for ten major commodities.  For each chart, the green zone represents between two standard deviations above and below the commodity’s 50-day moving average.  Moves above or below the green zone are considered extremely overbought or oversold. 

As shown in the first chart, orange juice has spiked above its trading range in recent days as Florida freezes.  OJ has been in a strong uptrend since the middle of 2009, so traders seem to have expected the cold, cold winter that the US has seen so far.

Most commodities are trading at or near extreme overbought territory at the moment.  Both oil and natural gas are right at the top of their trading ranges, and the same goes for platinum, copper, and corn.  After moving down to the middle of their ranges at the end of 2009, gold and silver have had a strong start to 2010 as well.

Source: Bespoken Research

Weekly Commodity Update 21-12-09

The dollar continued to strengthen reaching the highest level in 3 months and in the process triggering additional profit taking among some commodities.

The move has been driven by a combination of year end position squaring, a more upbeat tone from the U.S. Federal Reserve Bank and not least the cut in Greece’s credit rating.

News this week that Standard & Poor’s had cut the credit rating of Greece, as it struggles with a huge budget deficit, highlighted the risk ahead for the Euro zone with other countries finding themselves in a similar situation. The ten year yield spread between German and Greek government debt rose above 2.5% putting the nine year old currency under some pressure as we head towards 2010.

The timing of the downgrade had maximum impact as markets are slowing down ahead of year end thereby leaving it extra exposed to adverse news. The continued dollar weakness that had been expected as an almost certainty has come under renewed scrutiny and over these past few weeks a more balanced view on the dollar has begun to emerge.

Gold in particular has been struggling with the continued dollar strength. This has got to be viewed in the context of how the market has been performing over the past few months with large flow of funds moving into a crowded space. The USD 1,100 level was tested this week which represents a near 11% correction from the highs made some two weeks ago.

Technically the USD 1,100 represents a decent level of support but continued dollar strength could trigger additional position squaring with the October high at USD 1,070.80 providing the next level of support followed by USD 1,030 which is trend line support from the October 2008 low. Upside resistance is firm at USD 1,142 for the time being and a close above is required before a new push to the upside can be established.

Until we know for sure why the dollar has found some traction, getting out of commodities as an automatic reaction seems premature. If it happens on renewed hope of a U.S. recovery it should be viewed positively and a decoupling of the inverse relation between strong dollar weak commodities could come to an end. Given the time of year it is too early to speculate and the main thing for investors are to have their exposure at comfortable levels.

The energy sector found some support this week as the inventory data showed big draws in crude and distillate as imports stayed low and demand began to pick up helped by colder weather. The most strikingly impact from colder weather in the U.S. has been the performance of natural gas which have rallied 33% this month most recently helped by a larger than expected reduction of NG in storage. The October to November downtrend has been broken and the January high of USD 6.24 is next level of resistance.

Crude oil found support and rallied on the storage data. Focus on the stronger dollar and sluggish outlook for Q1 2010 have so far kept prices under pressure during December but renewed optimism about the prospect for a global economic recovery helped prices put in the biggest weekly gain since October. Support was found below USD 70 and resistance is located at USD 75 on the front month continuation. Next week sees the expiry of the January contract with February becoming the new front month.

We have seen big differences in performance among commodities in 2009. This is worth keeping in mind ahead of the annual rebalancing from S&P GSCI and DJ-UBSCI between the 5^th and the 9^th business day in January. In order to keep the same base weighting between commodities in their portfolio they have to reduce positions of strong performers and add positions of weak performers from 2009.

Given the current performance this rebalancing will have the biggest negative impact on WTI crude and HG copper and positive impact on natural gas and corn. Given that total asset under management in these two commodity funds stands above USD 65 billion some impact can be expected.

Weekly Commodity Update 11-12-09

End of year position squaring has begun with some commodity markets suffering heavy losses.

As highlighted over the last couple of weeks this time of year quite often brings reversal in the market. Especially when the direction has been so one sided for the past few months. It all kicked off last Friday as U.S. unemployment surprised the market by being better than expected. The chain reaction that followed led to a dramatic reversal in commodities with a strengthening dollar being the main catalyst for the move. 

Recent reports have talked about a substantial short dollar position having been built up over the past few months and it got to the point where investors were watching each other for the first move. As the unemployment numbers hit the screens a scramble for dollars began which over the next couple days saw the dollar strengthen by 2.7% versus a basket of six major currencies.

The commodities that have seen the largest build of long position over the past few months were also one of the sectors that have been hurt the most by this correction. Gold in a matter of days lost more than half of the November rally, falling by 9% while silver which tend to track gold but with a built in accelerator fell by 12%.

The gold to silver ratio which over the last year has been favoring silver broke out of its downward trend which short term at least indicates that gold could outperform silver. As long we stay above 64.40 (gold price / silver price) further upside can be expected.

Looking at gold the long overdue correction has now occurred. Over the next few weeks the main focus will be on the risk for additional profit taking primarily driven by a reduction in dollar short positions.

The 9% correction seen over the past week have already been met by new buying interest so given the general positive outlook for 2010 current levels may turn out to be a good area to begin re entering the market from. It is also worth mentioning that the recent sell off have brought us closer to the level where IMF sold 200 metric tons to India back in early November. The recent move lower could attract renewed interest from  another central bank to buy the remaining 200 tons that the IMF still have on offer. Such a sale would undoubtedly be viewed positively as it removes a potential overhang over the market and confirms Gold status as storage of value.

Technically gold short term looks vulnerable to further weakness for move towards USD 1,100 and potentially USD 1,085. However given the strong investor demand over the last few months and the positive outlook for 2010 short term sellers will most likely meet good buying interest. Resistance can be found at USD 1,160 and look for a renewed push to the upside on a break above USD 1,172.  

The energy sector have been one of the less convincing sectors over the past few months with the spot month of crude now trading some 15% down from the October peak. The sector have been hit by double trouble as end of year profit taking and continued storage building in the U.S. have hurt sentiment.

The stock building at Cushing, the delivery hub for WTI Crude, has continued to rise with the most recent DOE report showing a build of 2.5 million barrels. This is a total build of almost 8 million barrels over the last five weeks and given that we are roughly another 5 million barrels away from capacity this is hurting spot month prices.

Meanwhile North Sea Brent Crude has outperformed WTI reaching a premium of USD 2.5 this week which is the widest premium in more than 3 months. Historically WTI trades above Brent at premium between USD 1 – 2. The reason behind this reverse situation is three fold, strong demand in Asia, OPEC’s production cuts and not least the above situation with swelling crude inventories in the U.S.

Technically Crude oil is back into the USD 70 to USD 75 range with a continued downside risk towards USD 65 which should provide a solid floor for now. End of year position squaring together with continued focus on the storage situation will drive prices. Next week sees the expiry of the January contract and currently rolling longs into February comes at a cost of USD 1.80.

This week we launched our Emissions CFD which is based on the price of EUA Carbon emissions from the European Climate Exchange. This will provide investors with increased transparency into the cost and price of Carbon Emissions which is strongly related to energy prices such as Oil, Natural Gas and Coal.

The price of carbon emissions has plunged from EUR 30 per tons in July 2008 to only EUR 8 in beginning of 2009 as the recession hit across Europe and thus slowed the industrial production. In the last 6 months the price has been ranging between EUR 12 and EUR 16. A positive outcome of COP15 should have a positive impact on prices.

 A break above EUR 15.20 would target EUR 19.65 followed by EUR 25. Until the break has been confirmed expect continued range trading with support at EUR 12.85.

Weekly Commodity Update 23-11-09

Currency and stock market movements combined with a massive flow of investment into commodities continues to set the overall tone of commodity markets.

This week was the last full trading week ahead of the U.S. Thanksgiving holiday next week. This normally signals the beginning of the winding down for year end. After that time many traders and funds begins to focus on year end and on how they should be positioned into the normally quiet month of December.

Some risk fatigue began to emerge towards the end of the week with energy and base metals giving up some of their recent gains. Whether it is that or just early position squaring time will tell.

The wall of money floating around in the financial system continues to benefit commodities as a way of diversifying portfolios and in order to shield investments from a non-negligible risk of a US debt and currency crisis.  A research note from a major bank sees flows into commodities this year of USD 60 billion which will bring the total amount invested up towards USD 240 billion at year end.

Most precious metals and some base metals made new highs for the year and the Baltic Dry bulk index, which indicates the cost of shipping dry bulk commodities around the globe, rallied sharply. Gold still catches most of the headlines as it despite moving into a very overbought situation continues to make new highs reaching USD 1.150, a 12.3% rally since the news about India buying IMF gold broke some weeks ago.

We see the break above the 2008 high as a signal that a new rally has been initiated which could take the price of gold towards an initial target of USD 1.300 followed by a potential 5 year target of USD 1.500. Gold still has a long way to go – both in terms of price appreciation and in terms of years of increases. It will at times be volatile, experiencing quarterly declines, but the overall direction will be higher

Near term however gold has moved into an extreme overbought situation which has not been seen for many years and we urge new investors to be patient as a correction back towards USD 1,120 and maybe even USD 1,100 is increasingly likely. The trigger for a correction could be the upcoming U.S. holiday next week as positions in correlated markets like the EURUSD could run into profit taking and thereby remove some of the recent support.

The energy sector continues to be driven by present reality versus future expectations as the overall demand situation still remains weak. Good demand from emerging economies continues to be off-set by continued weak demand from the developed economies.

On this basis the overall investor appetite for commodities is still the main driver of energy prices as investors seeks shelter and a hedge from the falling dollar. This tuck of war has kept Crude Oil range bound over the last month with USD 75 to 80 being the current range.

The global economic pick up over the last few quarters is still happening on the back of continued job losses and that leaves a big question about when and by how much consumption will pick up. For now though the worries about dollar weakness and future inflation should be enough to keep the prices supported over the coming weeks and months.

Technically the front month Crude of January is currently stuck in a bullish flag pattern between USD 75 to 80 range and just the last few days some risk adversity has been seen on the back of a stronger dollar. A greater bullish potential remains as long prices stays above USD 75, otherwise there is a risk of returning to the recent USD 65 to 75 trading range. Some position squaring ahead of the US holiday next week will probably be the main focus into the early part of next week.

Commodity Snapshot

Below we provide our trading range charts of ten popular commodities.  The green shading represents between two standard deviations above and below the commodity’s 50-day moving average.  As shown, oil has been trading at the top of its trading range for a few weeks now, and its uptrend remains intact.  Natural gas has also made a nice move over the past couple of months, but it has struggled to make the next leg up over the past few weeks. 

As investors know, gold is currently the commodity of the day, and as shown in its chart, it is currently trading right at overbought territory.  Silver and platinum have rallied along with gold, but they don’t quite have the relationship with the dollar that gold has, so investors haven’t plowed into them as much.  Corn, wheat, orange juice, and coffee have also all done well recently.

Source: Bespoken Research

Gold bullion surging in all currencies

With the gold price scaling fresh peaks and closing in on $1,100, it would certainly seem as if renewed interest in the yellow metal is being stirred up, especially subsequent to the purchase by India’s central bank of 200 metric tons of gold from the International Monetary Fund.

As printing presses are running at full speed to produce ever-increasing quantities of fiat money as governments engineer the greatest asset price reflation in human history – and the US greenback is heading South – the longer-term fundamental case for the yellow metal is arguably positive.

“The gold bug has caught several big hedge fund managers this year including John Paulson of Paulson & Company, Kyle Bass of Hayman Advisors and David Einhorn of Greenlight Capital, who believe enormous monetary and fiscal stimulus that has been injected into the global economy will eventually result in hyperinflation,” said The New York Times.

The gold price is not only making headway in US dollar terms, but also in most major (and minor) currencies as illustrated by the table and graph below. This is a manifestation of increased investment demand, whereas the initial rise in the gold price from its low in 2001 ($250) was mostly a reflection of US dollar weakness.

Illustrating the message even more vividly, is the chart below of gold expressed in a basket of emerging-market currencies by dividing the dollar bullion price by the Wisdom Tree Dreyfus Emerging Currency ETF (CEW).

The shorter-term technical picture is also looking interesting.

Seasonally, the period from November to December has traditional been good for gold, with average gains ranging from more than 1% to almost 2.5% since 1970.

I remain bullish on gold in the medium term, especially as I believe the vast money printing by central banks could set off strong inflation pressures down the road. I will not be surprised to see bullion remaining in a secular uptrend in the medium term. Add bullion to your portfolios, but given the notorious volatility of the metal only do so on pullbacks.

Research: Prieur du Plessis

Weekly Commodity Update 30.10.09

Commodities began the week on the defensive but recovered as the U.S. GDP confirmed that the recession had ended.

The rebound in GDP however positive unfortunately came about primarily due to a rise in consumer spending helped along by various government subsidies such as “cash for clunkers” and tax credits for homebuyers. Both these subsidies have now been removed and the big question going forward is weather higher consumption can be sustained without government support.

Despite the rise in economic activity household disposable incomes fell during the quarter as unemployment kept rising. This lack of consumer confidence will play an important role during the next few months and whether the risk appetite will stay very much depends on economic data, crucially U.S. employment data next Friday.

The two main market drivers once again decided the direction during the week as early dollar strength combined with a 5.5 pct sell off in the S&P 500 sent commodities looking for support. Interesting support levels were tested in the process but the U.S. number were good enough reason to halt the return of risk aversion.

Crude Oil rally ran out of steam this week as weaker stock markets and an unexpected build in Gasoline inventories gave bears the excuse to test support that they had been looking for. The sell off only lasted a few days as support from previous highs around USD 77 halted the move.

Near term we expect continued consolidation with the range trading being the favoured strategy by most traders. Look for support at USD 77 followed by USD 75 and resistance at USD 82 (100 week moving average) followed by USD 85.

U.S. natural gas prices slipped after inventories rose 25bn cubic to another record of 3,759 bn cubic feet. One piece of good news is that is now highly unlikely that the national working capacity limit of 3,900 bn cubic feet will be breached as winter demand will increase over the next few weeks .

The market is however still left with a huge overhang of supply which has put the new front month of December under pressure as soon it became the spot month. Unless we see a change in weather forecast further upside seems limited. The December contract on Nymex will be stuck in a wide USD 5.45 to 4.35 range until further news becomes available.

The brief return of risk aversion which saw the dollar at one point strengthen by 2.5% also made an impact on gold thereby confirming the continued strong relationship between the two.  Spot gold dropped 4% but found support at the previous high at USD 1024.30 before rallying strongly ahead of the weekend.

Technically the new trading range continues to take shape with support at USD 1024 now confirmed and resistance at USD 1070 having proved solid over the last month. Additional strong support can be found at USD 995 which is trend line support from the 2008 low.

A worrying development recently has been the renewed rally in the price of rice. According to the U.S. Rice Producers prices may return to record levels as bad weather curbs output in major growers including India. In addition the increased cost of oil has pushed up the cost of fertilizers boosting prices further.

Everyone remembers the food price protests that swept the globe last year after fears of supply shortages prompted prices to surge to a record of USD 25 per 100 pounds in April 2008. The Philippines has brought forward rice imports for 2010 after cyclones have reduced the domestic output while the situation in India is being watched closely. So far they have not any plans to import rice as its reserves are adequate.

During the week CBOT Rice for January delivery reached levels not seen since January this year. Look for resistance at USD 14.80 on the front month continuation while a break could set up a move back towards USD 16.35.

In summary commodities had the biggest rise since May primarily driven by agricultural and energy markets with the CRB index rising 10%. Going into November continue to look for clues in the dollar, stock markets, weather forecast and economic data, especially U.S. employment data next Friday November 6.

Futures Trading on Total Trader

Total Trader is at the forefront of online futures trading, offering access to one of the widest selections of online, offline and pit-traded futures available. Find out more about Futures with Total Trader

Futures Live Data Costs

Clients can easily manage live data subscriptions through the integrated subscription management tool.

Access to Global Markets

The establishment of global futures exchanges allow futures investors and traders to diversify their trading systems by participating in over 50 different markets worldwide. These include currencies, stock indices, financials, agricultural products, precious metals, and energy products.

Major Exchanges Available

• CME
• ECBOT
• SFE
• EUREX
• GLOBEX
• ICE
• HKEX
• NYBOT

Commodity Snapshot

Below we provide charts of ten major commodities.  In each chart, the light green shading represents two standard deviations above and below the sector’s 50-day moving average.  As we all know, gold is all the rage right now and oil has taken a back seat.  As shown in the chart of oil below, it has basically gone nowhere over the last two months.  It is currently trading right in the middle of its trading range. 

Natural gas, on the other hand, has made a significant move higher and broken its long-term downtrend.  With gold charging higher, silver and platinum have also moved up, but they haven’t broken to new rally highs yet.  This is a key signal that the gold move is pretty much based solely on the dollar’s move lower. 

Looking at the rest of the bunch, copper has actually been trending downward, corn has bounced nicely recently, wheat is close to oversold levels, and coffee and orange juice are in neutral territory.

Source: Bespoken Research

Weekly Commodity Update

Commodity markets began October on the defensive with stocks weaker on the back of worse than expected economic data.

In the days ahead traders will be watching the S&P 500 stock index closely after the break below USD 1,034 on Thursday.  Activity reports from purchasing managers in the US, UK and the euro zone have left the markets struggling ahead of the US Q3 earnings season which kicks off on October 7. The unemployment rate rose to a 26 year high as employers continue to cut jobs. Next Wednesday consumer credit which last month fell by a surprising USD 21.6 bn will be watched closely.

Meanwhile the Euro has begun to weaken somewhat against the dollar falling to EUR 1.4480, a three week low, ahead of important support at 1.4440. At the same time we have seen the yen strengthen against both the dollar and the euro which normally indicates that risk willingness is declining.

Crude Oil reacted strongly to the weekly U.S. storage data rallying back to the USD 70 level after having reached a low of USD 65. For now the upside seems pretty limited as economic data during the week indicated that the U.S. economy is still in the midst of the recession. Also the uncertainty about the direction of the dollar and stocks will play its part in keeping the upside capped for now.

Technically crude oil for December delivery is stuck in a range between trend line resistance at USD 71.90 and 100 day moving average support at USD 67.80. The outer range is now USD 65 to USD 75.

Natural Gas traders returned to the supply situation this week after a month long rally had elevated prices by 67%. The USDA said that underground supplies of natural gas were up 64 billion cubic feet to 3.589 trillion cubic feet, a new record high and up 16% from a year ago.

Technically a gap on the continued spot month chart down to USD 4.035 is in danger of getting filled. This could indicate another 10% drop from current prices on the new front month of November. The USD 4.00 level coincides with 200 day moving average so it will be a good support level.

Gold continues to trade sideways either side of USD 1,000 with sellers emerging on any uptick due to an overhang of speculative long positions. Some disappointment has begun to emerge as investors gets worried that a correction is needed before the next attempt on the 2008 high at USD 1,032.70. Inflation worries have eased further with the forward expectation having dropped to 2.85% from 3.31% back in August (chart below).

Nervousness about the health of stock markets as we head into the Q3 earnings season has not lifted prices and more importantly the risk of a stronger dollar could pull it lower. Technically stay long of Gold above USD 985 but take profits towards USD 1,020 and look for better levels to buy. Keep a close watch on a break below USD 970 as it could signal a deeper and longer correction which would force many to adjust their near term forecasts.

Grain and oil seeds markets continue to watch weather forecasts closely as we enter into the US harvest season. Fears about frost as seen a couple of weeks back is the main factor that could interrupt what is expected to be a record harvest for Soybeans and second largest for Corn. The USDA will update their current yield estimates, production and supply-demand outlooks on October 9.

Corn for December delivery is confined to a USD 300 to USD 350 range with prices having held up despite the record harvest expectations.  A break above USD 350 should trigger a move towards the August high at USD 376.

Soybeans for November delivery meanwhile lingers at the bottom of its USD 880 to 1035 range with the record harvest forecast keeping prices under pressure. Look out for a break above USD 940 as it could trigger a move back towards USD 977.

Commodity Snapshot

Below we provide our trading range charts of ten major commodities.  The green shading represents two standard deviations above and below the commodity’s 50-day moving average, and moves above or below this range are considered overbought or oversold. 

As oil has moved to the bottom of its trading range in recent weeks, natural gas has finally moved to the top of its range.  Natural gas also just broke above its one-year downtrend line, and now traders will focus on resistance that was made at its highs earlier this year.

Metals have settled down over the past few days as the dollar has ralllied.  After trading above $1,000 for a short time, gold has moved back down to $992.  Corn and wheat remain in downtrends, while the breakfast drink commodities (orange juice and coffee) have charts that look like a heart-rate monitor with multiple spikes and falls over the past few months.

Source: Bespoken Research

Commodity Snapshot

Below we provide our trading range charts for ten major commodities.  The green shading represents between two standard deviations above and below the commodity’s 50-day moving average.  Moves at or above the green zone are considered overbought, and moves at or below the green zone are considered oversold. 

As shown, the energy and metal commodities are all currently at or above their trading ranges.  Even natural gas, which has been in a perpetual downtrend, has moved into overbought territory over the last couple of weeks.  Interestingly, gold is going up along with oil and the stock market, and the falling dollar definitely has something to do with it. 

The agricultural commodities like corn and wheat aren’t spiking along with energy and metals, which is a positive for those worried about food inflation.  And finally, coffee has bounced nicely in recent weeks after falling to the bottom of its range.

Source: Bespoken Research

Commodity Snapshot 28-7-09

Below we provide our trading range charts for ten major commodities.  The green shading represents between 2 standard deviations above and below the commodity’s 50-day moving average.  Moves outside of the green zone are considered overbought or oversold. 

The only commodity currently overbought is copper.  Oil, natural gas, gold, silver, and platinum are all right in the middle of their trading ranges.  Corn and wheat have been tanking lately and are getting close to the bottom of their normal trading range.  And coffee and orange juice are finally seeing some reversion to the mean after seeing some short-term divergence a couple of weeks ago.

Source: Bespoken Research

Market ‘Noise’: How Seasoned Traders Learn to Ignore It

For many years I was a futures market reporter. I spent time working right on the futures trading floors in Chicago and New York. Most of the time my daily reporting “beat” involved interviewing traders and analysts and then writing three daily market reports. For months at a time I would cover the same markets, day in and day out. It was a fantastic learning experience and an opportunity that very few get.

One thing I eventually discovered from covering the same markets day after day, month after month, was that the vast majority of the time the vast majority of the markets’ overall fundamental and technical situations did not change on a day-today basis. Yet, as a market reporter I was conditioned to write about why the market went up one day and why the market went down the next day, and so on.

Even though a market may have been in a very narrow trading range for days or weeks, I had to ask the traders and analysts every day to come up with some fresh fundamental and\or technical reasons why that market moved only a fraction. Reporting on the New York “soft” futures markets (coffee, cocoa, sugar, cotton and orange juice) is especially difficult for a reporter. He or she needs to dig up and write about some fresh-sounding news every day. The soft markets many times just do not have much fresh fundamental news on a daily basis — or sometimes even on a weekly basis, for that matter. Conversely, it was easier covering the financial and currency markets because there was usually at least one government economic report that came out every day that would make those markets wiggle a bit. Or, some government official (like Greenspan) would make comments to which those markets took notice.

As time went on and I came to better understand markets and market behavior, and as I studied specific trading strategies, I realized that the day-to-day market “noise” is not of much use to most traders. Here’s a specific example of market noise:

Recently the live cattle futures market was up a bit on a Monday due to talk that the cash cattle trade later in the week would be at higher money. On Tuesday the futures market dropped a bit because of ideas the cash cattle market trade later in the week may not be at firmer money, but steady at best. Nobody was trying to manipulate the live cattle market that week. It was just a case of differing opinions getting center stage when the market closed on different sides of unchanged.

For a trader who tries to follow the near-term fundamentals in a market too closely, hearing that kind of conflicting news can be a nuisance at least, or a factor that prevents successful trading results at most. It’s not easy for less-experienced traders to ignore the differing daily drumbeat of fundamental news that is reportedly impacting a market.

The lesson here is that prudent traders should not become overly sensitive or reactive to most of the day-to-day fundamental news events that are reported to be moving the market on any given day. What is important for the trader is that he or she recognizes and understands the overall trend of the market, and that daily market “noise” is usually an insignificant part of the overall process of trading and of market behavior, itself.

Commodity Snapshot

Below we highlight our trading range charts of ten major commodities.  The green shading represents between two standard deviations above and below the commodity’s 50-day moving average, and a move above or below this green shading is considered overbought or oversold.

On the energy front, oil and natural gas have declined quite a bit over the last week.  Oil remains in the center of its trading range, however, while most other commodities are now in oversold territory.  Gold, silver and platinum have all pulled back sharply since early June, while corn, wheat, and coffee have fallen off a cliff.  The one commodity that has bucked the overall downtrend is orange juice.  It was in oversold territory just a couple of weeks ago, but it has rallied nicely in recent days.

Source: Bespoken Research

Hong Kong Futures – Now Available

We have expanded the range of futures exchanges we cover to now include Hong Kong Futures. Below is a list of the recently added major Hong Kong futures contacts.

Try trading Hong Kong futures with a Free Total Trader Demo Account

Hang Seng Index (HSI)

Contract size – 50 HKD * Index
Minimum trade – 1 contract
Tick size – 1
Tick value – 50
Order types – market, limit 

Mini Hang Seng (MHI)

Contract size – 10 HKD * Index
Minimum trade – 1 contract
Tick size – 1
Tick value – 10
Order types – market, limit

Hang Seng China Enterprises Index (HSCEI)(HHI)

Contract size – HK$50 per index point
Minimum trade – 1 contract
Tick size – 1
Tick value – 50
Order types – market, limit

CNBC Report by Bill McLaren – 5 June 09

LET’S LOOK AT THE S&P 500 INDEX -DAILY CHART

 

Two weeks ago I indicated the index was going up into the 90 day time window and could be an important high or even a top.  Please understand the trend remains in a strong position holding above swing highs and since the last low the sell offs have only been one day.  So looking to short this market will be very high risk without some evidence but I do have a time window for the next three trading days that could be very difficult resistance.  Price resistance is maximum 1012, then 995 and 963.  A move above Tuesday’s high seems likely and a break of the low of the high day would be the first indication a high could be in place.

LET’S LOOK AT THE 30 YEAR US T-BOND

 

This is the Feds worst nightmare.  Rates are rapidly rising.  Normally this would occur if the economy were improving.  Unfortunately bonds could be falling due to the government policies and not economic demand-we don’t know.  The Fed cannot control long rates-they have tried in the past a failed.  So Bonds could ruin the part and should be watched.  Best date I have to end the move down is around June 16^th but that is not a high confidence cycle but is still a 60% probability.  Could be still in a capitulation move down. Support marginally below 113 then 108.      

LET’S LOOK AT THE US DOLLAR INDEX-DAILY CHART

 

Two weeks ago I said the US DOLLAR was in a panic move down and would not rally past 4 days until the panic was complete.  I indicated the important dates were June 2^nd (the current low) and June 8^th.  The 8^th is Monday and could be another counter trend high if the index goes up into that date and would indicate the panic style of trend will continue.  IF it moves up past Monday then the 2^nd could be a low of some significance. If Monday is a high then June 20^th and July 8^th could be vibrations in “time” and the end of the cycle and possible end of the trend will be July 26^th.  If the Dollar is going down into that end of July date there will be one rally of 7 to 12 trading days before 26^th.  But for now the panic is continuing.  This is very important IF Monday is not a counter trend high then a low of some significance is in place.  The reason for this is the possibility of a “false break” low versus the December low if it can rally past Monday.  If Monday is a high then that “time” factor will be valid.

Source: McLaren Report