LightWave Commodities Blog

Playing the End Game

ronsmith — Mon, 08 Feb 2010 19:40:00 GMT

For those who it hasn’t occurred to yet, the markets have rolled over into a bear continuum. It’s the same story we saw in 2000 and 2009 when the indexes were way over valued as to P/E ratios and Dividend to Earnings, so we should expect the same results as in those years.

If ever there was duplicity in conspiracy, the poster child is the Federal Reserve Bank Corporation. Sometimes I forget the fact that the controller of the “of the people, by the people, for the people” economy (recently confirmed chairman Bernanke has told Congressional Oversight Committees that the Fed is not accountable to the United States Government for expenditure of its money) is a corporation acting on behalf of its shareholders, whoever they may be.

The violations against its charter are innumerable. The latest one, Central Bankers are secretly meeting (the last time I heard, that was considered conspiracy) at the North Pole/South Pole to do what we have only one conclusion at which to arrive…replacement of all reserve currencies with a new one. Finally, the Central Bankers will have one currency whose distribution is totally up to the discretion of the Central Bankers. Hallelujah, I thought this day would never happen!

Now they can be totally private with our currency. Of course, it isn’t our currency because our currency, the “of the people, by the people, for the people” currency doesn’t exist according to the guidelines of the US Constitution, which was the CB’s intention all along. They made us debtors by burying us under social welfare program after program. Then they made a very handsome profit from the usury from giving us their currency to fund the programs. Old News!

Dow could retrace below 6400 by this time next year. Crude Oil could rise to $95 in May after this pullback, but the prospects of having any demand for it in a year from now doesn’t fit with a 5000 Dow. The Euro will find parity with the US dollar (Fed Reserve Note) because Europe’s socialist programs debt (coupled with shrinking US military occupation forcing them to provide their own defense) will break them. Small country’s economies (Poland, Greece, Portugal, and Spain) like Ireland’s and Iceland’s will falter with whatever currencies they use becoming worthless against the Euro and Dollar reserve currencies.

Commodities, because of shrinking US dollar value will skyrocket for a while in a crippling effect on household incomes vs. expenditures. If that scenario follows course, Gold would be at $1,600 to $2,000 by this time next year, but Silver would be a better investment. Gold is money; Silver follows.

This cycle we are entering is larger than anything I have seen in my lifetime. For this reason, the timing is harder to figure than in normal times. However some things are glaringly apparent. Our real national debt is $52 Trillion Federal Reserve Notes. It cannot be sustained in the near term or long term. The era of credit expansion has ended.

Timothy Geithner today stated “the US will never lose its AAA credit rating.” If that is true, as in a matter of a known and accepted worldwide fact, why bring it up? Why have to state it? Statements like that usually mark the end of the era.

Today’s Market Comments for 4Feb2010

ronsmith — Thu, 04 Feb 2010 15:25:00 GMT

Indexes: Monday’s and Tuesday’s lack of volume rally coupled with the small decrease in the USDX value gave a warning as to the strength of the upswing. Today’s action in premarket gives rise to the belief in Friday’s Non Farm Payroll Report being ineffective in causing a major change in trend direction. Volatility in the market will no doubt cause a wide swing in both directions, but at the end of the day I see the market coming back into the trend it was in before the report.

Metals: As with the Indices, the lack of volume and Tuesday's decrease in strength in the Gold rally without significantly inversely affecting USDX now becomes the factor in resuming the seasonal downtrend in metals. Copper closed yesterday at a 12 week low and below the 15 week moving average for the first time in a year.

Energy: Crude Oil has the same story as Indices and Metals as the seasonal downtrend continues through February into the first week in March. In my interview with Alan Farley yesterday on Trader Views Network revealed, if the trend for the last 25 years holds true, we could see lower prices in almost all commodity futures until early March.

Grains: Surprisingly, Wheat and Soybeans closed up in the overnight session, but with USDX rising, the open of pit trading could see a massive downturn. Look out below!

Financials: Interest rates pushing up from the 30 Year US Bond above the current 4.65% level would break its 29 year trend line and bode for increasing interest rates for a long time to come. Oddly enough, the increase in interest rates could spur some retail home buying as people try to take “lock in” before last remaining low interest rates disappear.

Currencies: Obviously, with a Rising USDX almost all currencies with falter against it especially the commodity based Canadian and Aussie dollar.

Meats: Live Cattle’s major downtrend resumes with some power in the charts. Lean Hogs sellers are trying to push prices lower, but the buyers haven’t let the market penetrate the 65.85 low set Monday on high volume.

No buy-hold-sell intended in these observations, but I can absolutely positively recommend “Don’t trade without a stop loss in place,” because trading is risky business.

Bullish Wheat, again?

ronsmith — Mon, 01 Feb 2010 16:05:00 GMT

Last week both March Soybeans and March Wheat closed on the daily and weekly lows. While this would appear very bearish to most traders, the signal set up a major COT buy signal. This is not my recommendation as I never trust signals given by anything but the charts. What I want to see is a key reversal day in which the market gaps down at the open and then retraces to close at least above of Friday’s high and preferably last week’s high of 488.5 in Wheat and 936.75 in Soybeans. This may not happen as it would be ideal, but I’ll take a “close as in hand grenades” to see if the market has increasing potential to the upside.

What normally happens (if anything is normal anymore) is a surge off the bottom with a pullback to test the low. This is when the charts come into agreement and there is a fresh cross on the Daily chart. This is what I am waiting to see. The move following this change in direction surge can be the strongest and fastest moving of all the moves. The risk can be a little easier to calculate, and I think it is worth the wait.

As I am watching, the market in Wheat has bounced up 17 cents…….

Bullish Wheat?

ronsmith — Thu, 28 Jan 2010 17:33:00 GMT

An Alert was sent to me last Friday:

Two ships containing 40 tmt and 50 tmt of feed wheat from Brazil is said to be waiting to offload on the East Coast. The wheat is sourced out of Brazil. Now Brazil is a net importer of wheat. Just tells you how over priced US wheat is.

To me, this is an example of the long term supply and demand pendulum swing through markets.

If you remember, many pig “farmers” in South America gave up their pigs and started grain farming when prices were at their zenith in June of 2008. High grain prices cut deeply into profit potential especially in other countries where there is less subsidy as in the U.S.A. Subsequently, all cattle producers were forced to absorb increases as meat prices were falling.

The exporting of wheat is due to more farmers growing wheat and fewer end users of the feed grain in South America. Ninety thousand metric tons of wheat is a substantial amount to export for a net importer. Is the grain being exported to take advantage of high prices and a strong dollar with the intent of buying it back later, cheaper? Or is it a true indication of the glut of the wheat market confirming trend direction for 2010? Either way, it isn’t bullish.

Slam Down in Cocoa

ronsmith — Wed, 27 Jan 2010 18:24:00 GMT

What a sell off in Cocoa, Cotton, Coffee and Sugar today. I went short Cocoa at 3351 (on a Hollin Commercials recommendation) risking omly $190.00. I am trying to learn day trading and only took $360 profit in an hour and a half on one contract. I don’t have time to figure out the long haul as in the past with LightWave getting ready to go public, so I took profits and went on to work. The market continued down another $1,000 after I got out, but I had to say, “I’m happy!” Return on $1,260 Margin was 28% and the time in and out was short, interrupted by an hour long Commodities Live broadcast and now I can move on to the next project.

Jim’s Single Method wasn’t in play for the e-mini Russell for the fourth day in a row (which is part of the reason I got out of Cocoa). The market was higher at 8:59 than at 8:30 (Central).I know this market is going to have a big move in the time frame and pattern I want, but I just have to be patient. Patience is the best friend a trader can have.

The Way the Game Ends

ronsmith — Thu, 21 Jan 2010 13:07:00 GMT

There may be a further series of run ups accompanied by exuberance in the stock markets as smaller investors chime in adding their money in the hopes of regaining some of what was lost in 2008. Certainly, the 60%+ gain in the DJIA since March, 2009 is compelling. On March 13, 2009, I wrote The Way the Game is Played, The Way the game is Played, Part 2 and The Way the Game Continues as a think pieces as to how Treasury Secretary Timothy Geithner and Chairman Bernanke were going to get investors to buy Credit Default Swaps on subprime mortgages bundled as CDOs.

To review some of the ideas set forth in those blogs:

“Some criteria for the hedge funds involvement would be incentives to buy these toxic assets. Among these would be purchasing the assets at a discount.”
“The Stock market would have to rise above 9,000 with vigor and head for 1999 – 2000 highs (11,000 in the Dow).
The smaller investor would be wooed into the market with analyst’s projections of 20,000 Dow.
“The Recession is Over!” “The “Economy is Saved!!” would be the news headlines and quotes from those in “the know” and political leadership to fool people into believing in a false premise to bolster reinvestment in the markets

All these things have now come about. Within two weeks after my first blog, Geithner made "THE DEAL” with hedge funds to give away the toxic assets to Wall Street . The DJIA has reached 10,729. The smaller investors’ money is being placed back into the market through their 401K managed accounts. Both President Obama and Vice President Biden have marveled at the “recovery from the worst recession since the Great Depression”. Biden is surprised at the speed of the recovery. Bernanke seeing no threat of inflation points to the economic indicators and declares before Congress that “the worst has been avoided." The economy is saved.

Who is fueling the recovery? Click here to hear how Charles Biderman sees it. The investors? The US Treasury! The Fed! We the people…..eventually! Among other clues, Biderman points out the afterhours running up of the Indexes Futures markets in overnight transactions. “Add up all the gains and they have happened overnight. Gains after the futures market closes at 8:15 am Central (the stock market opens at 8:30) until it opens at 3:15 (15 minutes after the stock market closes) have been negligible.”

The amount of money necessary to fund a run up in the stock market would be $500 to $800 billion, but in the futures markets with leverage at ten to one, the same thing can be accomplished for $50 to $80 Billion. Certainly that amount of money most people don’t have underneath the mattress, but the Fed does. Biderman says, “Somebody is doing it! We just don’t know who.”

If the markets are being manipulated upwards as suggested by Biderman, could they have been maneuvered down? Or, have they already been nudged that way in the past? If they are the buyer, what happens when they sell? Charles Biderman's replies, “…the market will crack!” We have a situation. We have no hiring, no mortgage lending no manufacturing rise. What’s propping up the economy?

The Game.

USDX Strength today

ronsmith — Wed, 20 Jan 2010 13:11:00 GMT

The USDX is significantly higher overnight and is helping bring lower stock index and energy futures for today. At 78.38 (high at 6:55 AM Central) the USDX is a full half point higher than yesterday’s high. This has helped push the Crude Light contract below 78, gold below 1140 an ounce and Soybeans below 960’0 per bushel.

US Bonds and Treasury Notes are rising with the dollar while major Currencies are falling minus the Yen. Sugar continues to rise after yesterday’s push through 28.95. A new contract high at 29.45 has been posted and strength continues to show in the charts. Orange Juice is up, but weak. The remainder of the Soft market is down against the dollar’s strength. If the trend continues, we could see significant pullbacks continue in major commodity markets.

Corn Prices and Pepsi Throwback

ronsmith — Thu, 14 Jan 2010 20:52:00 GMT

The Grains continued down today based on the aftermath of Tuesday’s bearish USDA supply report. Wheat surprisingly continued its down trend in spite of the slightly flat report, but the term “a high tide floats all boats” comes to mind. The seasonal trend is for wheat to sell off in January, and this may lead to a wheat led recovery latter this month or in February. Soybeans tend to post a late January low, so the market may continue to sell for awhile longer. The problem with Corn is the obvious over supply with little increase is demand. Many farmers reported still-in-the-field status, but that may turn out to be a good thing this spring. More farmers are intending to plant corn next year.

Could an unforeseen problem be brewing? The public is becoming aware of the possible link to diabetes and high fructose corn syrup or HFCS (see article) that you find everywhere sugar should be. It accounts for nearly half the amount of sweetener used in the U.S. annually. The current “experiment” with Pepsi “Throwback” and other soft drinks (see article ) may be a marketing probe into the seriousness of that problem. If sales should switch to sugar based drinks dramatically, signaling a change in lifestyle choice for Americans, there could a downward spiral in corn prices continuing for all of 2010. We'll analyse these markets and more Monday.

Feeder cattle may be reduced to endangered species status. More next week.

Another blog for next week: “Is there an anonymous big bidder in Treasury actions?" For more information about this week's US Treasury auction results, click here:

Natural Gas Facts

ronsmith — Wed, 13 Jan 2010 15:23:00 GMT

The following information about Natural gas was collected and forwarded to me from Stephen Beilby, and to him I say “Thanks!”

“Statements gathered from many sources, here is why nat gas is choppy and can't seem to rise in this winter environment:

“1) Estimates are for 200 Billion cubic feet draw on storage report this Friday due to the current nationwide cold snap that is coming to an end - frozen wellheads contributed to supply problem.

“2) Cold snap ending takes pressure off rising prices.

“3) Rise in price has brought more wells online, highest number since last April.

“4) Seasonal trends are in a ‘selling off’ time.

“5) COT reports show overbought - vulnerable to small speculator liquidation if support levels are violated.

“6) Technical signals show crossing down in Moving Average tech signals, but several of the other signals like RSI, MACD, and Stochastics are showing oversold in certain timeframes, but not all of them yet.

“7) Industrial demand has not picked up yet.

“8) Support seems to be at 5.31 now.

“And, finally, 9) predators, ‘snakes in the grass’ (my terms for them), seem to want to hunt for stops in the downward direction the past couple days - will they become exhausted soon at these levels?”

In addressing these facts the following thoughts came to my mind:

Estimates are always wrong, high and low, but rarely are they on target.

This may not be the last cold snap for the entire nation, and the big Natural Gas traders have their own meteorologists to give the at least two weeks out guestimates on upcoming weather.

Placing wells on-line takes time, and they were shut down once before for oversupply.

In a downtrend, when Commercials add to their short positions, we sell.

Seasonal trends were off in 2009 more than in many years, but they bear watching.

Predators rarely tire of making money.

You've heard "trade with the trend?" That’s one of the fastest ways I know of to get it to reverse. All kidding aside, the market has more room to the downside, and I want to take advantage if it goes there.

In order to get Natural Gas to reverse and move up, what is needed is a prolonged winter (one you expect with global warming). A winter like 1978 that makes a 10” snowfall in Dallas look like child’s play; freezes all along the Eastern Seaboard down to Cuba; one where you can’t find Chicago due to the snow; and Mexico City is under a winter advisory; that sort of thing.

Sugar Drop

ronsmith — Fri, 08 Jan 2010 18:06:00 GMT

The Low set in Sugar this morning at 27.55 established the completion of a five waves down move. The 50% retracement from yesterday’s high at 28.95 became 28.25. The high so far today is 28.35 where sellers came in strong. The market may not set a new low for today, but Monday’s Open will be interesting. I hate to be in a market over a weekend and so we say goodbye to the move. (A drop to 26.08 would be a 1.618 multiple of the wave one [28.95 - 27.55] completion.)

There is little (but still some, because this could just as easily set up a run at a new High) doubt that the signals developed in candlesticks, e-wave, MACD and RSI supported a down move. If this works out to be the top in Sugar, we will have ample opportunities to enter on the downside. With the completion of this move, the market could find itself back at another larger 2 position and ready for a major drop into the single digit numbers. Price action has yet to declare the top is in, but today’s action turned the Short Term light red. In just one and a half trading sessions, Sugar went from a new 52 week high to a red light. Amazing!

Sugar Needs Confirming Action

ronsmith — Thu, 07 Jan 2010 20:59:00 GMT

Sugar (SBH0) set a new high price today, then sold off to close below yesterday at 28.04. This action turns in another bearish signal, a key reversal day (See yesterday's blog). Lower price action tomorrow is needed to confirm the reversal. Swing and Intermediate Trade Strategy Targets for profits could range from 25.00 all the way down to 20.50. Continued movement to the upside above today’s new high confirms the upward trend and the Fibonacci target at 32.00. Some analysts have say Sugar could reach 40.00. I say “The best Sugar trade will include a well placed stop loss.” Keep watching. (See the attached SBH0 chart)

Crude Oil is showing an inside day and in the afternoon broadcast on WTV Channel 2 from 1:00PM to 2:00PM Central I discussed the Larry Williams Inside Trade Strategy which some traders employ in the same scenario we currently find Crude Oil. I was interrupted in that chart interpretation by cheers for the University of Texas Longhorns in their National Title bout with the University of Alabama Crimson Tide tonight. I will predict the winner of that game: Whoever plays the best will win.

Have fun...use stops!

Market Commentary January 6, 2010

ronsmith — Wed, 06 Jan 2010 18:34:00 GMT

Seldom are so many indicators and signals collectively pointing to change in direction for a commodity as Sugar has today. The candlestick on the daily chart from yesterday appears to be a shooting star. Price action today needs to confirm that reading. Today’s high of 28.35 shows more strength to the upside than yesterday’s 28.90.Will divergence set in giving us a shorting opportunity? If this market pulls back, the 28.5 area is 50% of the move from 28.90 to 27.30. 28.59, if you must have the exact location of the most common pull back area.

There is continuing divergence in the MACD signal and the market ‘s latest rise. The divergence shows up in RSI as well. Even though the price continued to rise, the indicators grew weaker. Seasonally, for the past 30 years, the trend has changed around this time of year and the drop has been sharp. It may be the end for the E-Wave B count (if you are into that sort of thing). Wavers log in the spike to 28.90 as a blow off: 5(5)B to begin the retracement of the previous leg up.

Finally, Commercials are beginning to buy according to the latest COT report. Some traders use commercial buying to initiate a buy themselves. They rely on the timing of “When the commercials quit buying, Buy!” to enter the market. Eventually all these indicators will catch up to the market and the selling will begin in earnest. When? That’s the big question.

Market Matters -Commodities-Oil January 6, 2010 by Scott McCormick, CMT

Mr.MACD — Wed, 06 Jan 2010 18:19:00 GMT

Market Matters -Commodities-Oil January 6, 2010

by Scott McCormick, CMT

Oil has been rallying for the last 4 weeks now, and maybe it's no surprise considering the cold snap that has hit most of the nation during that time. But as usual we all like to know where things are going, so here is my attempt at giving you the technical breakdown on this fossil fuel.

After spending nearly 5 weeks, beginning in October, testing the $80-$82 level Light Sweet Crude Oil Continuous Futures Contract managed to close above this old resistance today at $83.17 (last print at 18:48 EST). Analyzing the price action since the June 2009 high Crude has formed a nice upward channel that is approximately 17 points difference from the lower channel line to the upper channel line. So far, Crude has bounced 14.93 of the 17 points from its December low at 68.59.

In addition to the upper channel line there are two Fibonacci levels that I am watching that could act as resistance in the short to intermediate term. The first Fib level is 90.24, which represents a 50% retracement of the entire decline from 147 to 33. The second level is 93.92, or a 78.6% retracement of the difference from 110 to 33. The reason I picked 110 is because this level acted as resistance after a two week rally from the September 2008 low. These two levels also correspond with a range that Crude spent 9 weeks in back in late 2007 early 2008 spanning from 99-85.

For now, it looks as though Crude will continue its march onward and upward. Watch for resistance in the low to mid 90's, and should Crude close back below 80, then I would keep a close eye on the 68 level once again.

Market Commentary January 4, 2010

ronsmith — Mon, 04 Jan 2010 18:41:00 GMT

Generally the markets are all counter to the USDX’s contraction to 77.57 low set at 9:30AM this morning. Undoubtedly these markets have better charts than we have seen in recent months with Long Term, Mid Term and Short Term in agreement in all markets except Cocoa, Cattle, the Soybean complex and Financials.

Soybean Meal is showing divergence in the Short Term chart and beginning to turn bearish, with the Mid Term chart volatile. We could see a significant sell off back to the 298 area to test support there. The high of 313 looks extremely weak, and may be the high for the next two days.

Cocoa needed a rest from the break above 24.40 to the current high of 35.10 (12/16/09). The current retreat hit the 3200 area today. A break below 30.20 and the range of 28.00 comes into play. Fifty percent retracement of the recent move is about 28.00. That is also where the 50 (Month) MA currently resides. The overall trend is up, but the divergence in MACD and also in RSI is worth noticing.

I don’t think the dollar is finished rising against other currencies. The flood of dollars into the Global Banking System as well as the shadow banking system may be yielding the desired results of stopping the meltdown of the economy. While the threat of collapse is still in the deck, the Toxic Asset Window and the To-Big-To-Fail mentality continue to prolong the consequences of greed.

The estimated total loans of all banks both regulated and shadow equaled $12.5 Trillion in 2007. This amount far exceeded the amount of cash on hand and inflows combined; hence the potential collapse and the need for bailouts. Since this is a global event, coupled with the lack of an alternative world currency, most investors are stuck with the dollar and the consequences of the current quantitative easing policy. It makes sense to pay back loans with cheaper dollars. After all, isn’t this what China is doing by not allowing their currency to be revalued at a higher rate?

Expert advice for trading futures!

ronsmith — Thu, 17 Dec 2009 16:01:00 GMT

I read many daily commentaries on where the markets are headed. Most have an underling bias slanting their current predictions, but for the most part, they all sound strangely alike. The following is a combination, condensed and slightly edited version of their comments :

“The market is poised to go much lower on a pullback to a Fibonacci level around the 4.618 area not seen since I was a lad in Illinois. This downturn will begin today unless we set a new 52 week high after the FOMC announcement. In that case, the new high will lead to higher highs in a new truncated 8^th wave cycle 4-Cb pattern. If, as I suspect, the market turns lower, it will not be confirmed until we have a low exceeding yesterday's low. We need to see a series of cycle lower lows to say that the top is in.”

Let me get this straight, Mr./Ms. Expert! If the price moves higher, the market is moving up? But, if the price moves lower, the market is moving down? If we don’t set a new high, then the old high will remain the high until we set a new one? Wow! How much do you charge for this insight?

What the “experts” are really saying is that it all comes down to price action. Price action comes first and everything after that is interpretation. So why not use the Wizetrade Commodities lights and charts to do the interpreting for us. We can use MACD, RSI, volume and a host of additional indicators to give us additional visual high probability buys, holds or sells. The Key is good money management to insure we have enough equity capital to trade another twenty times, because we all know it’s a numbers game. As Lindsey Hall said one day, “We have to make more money than we lose!” And, that expert advice was free.

This is my last post for 2009. I hope you and yours have a very wonderful holiday and prosperous 2010. Thanks for listening to my broadcasts, and for all the contributions you make to Commodities Live.

Coffee, Cocoa and Sugar: It’s always something!

ronsmith — Mon, 14 Dec 2009 21:31:00 GMT

While Sugar broke to the upside in fine style today settling at 25.00 (March contract), there is still one more obstacle in its way at 26.25, the March contract high. The move today had power and volume. There is room to the upside as RSI remains below 70 and the market has a possible target as high as 32.00 based on Fibonacci numbers. I would like to see a break above 26.25 and a pullback to 24???something to test that breakout. However, if lights and charts remain strong, I am looking for an entry long.

Cocoa looks weak. I almost went short at 34.20 (seems like 34.40 was a good place for a stop), but the market set a new daily high 34.22 as I was setting the order. I waited and am glad because we have no chart confirmation. Cocoa settled at 34.10. The failure to make a new high above 34.39 could open the door for a great shorting opportunity in the near future, but I need something beyond gut instinct to help me into that trade.

Coffee continued the strong up move as well today, but still has a way to go to break out of its range. I want to see 148 plus to confirm the move up.

Sugar breakout?

ronsmith — Fri, 11 Dec 2009 20:12:00 GMT

If ever there was a sideways range bound market, sugar is its poster child. Clearly, there was no other present direction until prices broke above 24 today. They also closed above 24 at 24.10 just .01 (one tick) below the last high of five weeks ago. Now, the market has a chance to make anther 12 cents in the near future. Fundamentally, sugar looks to go higher long term with several European countries claiming new green fuel production plants on the drawing table. Technical buying may bring in further rallies. If Sugar sustains the rally this week, the chance exists we might not see the end of rising prices until mid January.

Cocoa

ronsmith — Fri, 11 Dec 2009 14:40:00 GMT

The Softs AKA Food and Fiber Markets seem to be independent of each other and reflective of true supply and demand influences.

Cocoa for instance, keeps setting new highs.The 2009-2010 harvest which is underway in the world’s largest producer, Ivory Coast, is anticipated to be flat or down to last year which was down 14% from normal, due to the continuing disease, aging trees, and years of political and military strife taking a toll on growers. Last year’s delayed end user buying found limited supplies, and technical buying pushed prices past all time highs reached in 1980.

Some analysts believe the strength in cocoa is being driven by the US dollar and British Sterling weakness which has brought out technical buying by investors. Today’s high reflects that continuation. But, if the dollar continues to recover, the main crops come in from West Africa and origin selling begins in earnest, a decline could begin in the next few weeks, perhaps at the end of December or early in January. Nothing cures high prices like high prices.

Delisting of South Jersey Port Corporation

ronsmith — Tue, 08 Dec 2009 20:17:00 GMT

Maybe the delisting of the deliverable copper means nothing more than what is said:

Effective Wednesday, December 9, 2009, Commodity Exchange, Inc. COMEX (or Exchange) will implement an amendment to its Copper Futures contract, Supplement No. 2 Licensed Warehouses for Copper to remove the facility operated by South Jersey Port Corporation, (SPJC ) located in Camden, NJ, from its list of Exchange Licensed Warehouses for the storage of Copper.

South Jersey Port Corporation, an existing Exchange Licensed Warehouse for the storage of Copper, has notified the Exchange that its facility, located at Second and Beckett Streets in Camden, NJ, is no longer available for the storage of Copper deliverable against the Exchanges Copper Futures contract.

One of the warehouses providing copper for delivery simply states it no longer wants to be listed as a delivery port. Simple enough! In looking for news of One of the oldest port authorities in the world, South Jersey Port Corporation specializes in its break bulk market niche and is in continual pursuit of emerging markets.

Tracing back to 1834 when the Port of Camden, NJ, was established, South Jersey Port Corporation was created in 1926 and put the City of Camden on the map as a world-class port. Through the decades it has grown to four terminals including Beckett Street, Broadway, Port of Salem and the new Port of Paulsboro that handle both international and domestic cargo. It’s also landlord to 30 tenants.

“We were always involved in break bulk. While other port authorities were putting so much infrastructure into cranes for containerization, we decided to stick with break bulk and found our niche. It’s worked very well,” says Joseph Balzano, South Jersey Port Corporation Executive Director and CEO. “I don’t think the business would have succeeded like it has if we had focused on containerization like others.” (quoted from Supply Chain Digital’s 01 Oct 2009 article by Sara Wolfe)

The article doesn’t detail any financial trouble caused by the recent rise in copper prices. Why delist from delivering copper? China has been buying copper in masse since 2006, and this company specializes in break bulk in its pursuit of emerging markets like China. The economic down turn has cut profits in shipments of other products South Jersey Port Corporation handles like fruit, auto industry and construction.

In 1999 Del Monte and South Jersey Port Corporation completed the construction of a 76,500sq ft temperature-controlled warehouse, “more than doubling the port’s capacity and enabling growth to rise to more than 520,000 tons of imported fresh fruits annually. South Jersey Port Corporation is Del Monte’s largest distribution center when the St. Lawrence Seaway freezes.”

“We’re a niche shipper and also handle the cocoa beans coming from West Africa and Indonesia for chocolate manufacturers like Hershey’s and Blommers; and furnace slag from Italy called GranCem™,” says Kevin Castagnola, Assistant Executive Director.

Why give up copper delivery? Maybe there isn’t enough tonnage transfer to warrant crews and machinery necessary for a profitable business venture. Maybe there isn’t enough copper available to deliver against contracts assigned by COMEX. Is there a clue here as to the future delivery of other metals specifically gold to the speculators’ increasing demanding for delivery?

This brings up the issue Jim Sinclair made several years ago: COMEX does not have the gold to deliver against speculative contracts. However, no exchange can deliver any commodity against speculative buying. Most markets are made up of about 90% speculators. It’s impossible to deliver anything except milk and eggs against the total number of long positions, but the question is now raised. If an exchange can’t deliver against demand, then what do end users and those who are speculators with long positions do?

Is there a reserve amount of gold at COMEX sufficient against demand delivery? Time will tell, but if it doesn’t have the bullion to cover the increasing speculator demand, will it decide to tell CME Group to delist its contracts as deliverable? What happens to demand then? What happens to the price of gold? Lack of sufficient supplies could be catastrophic downline for end users as well as those seeking safety from impending hyper inflation. "Where's the gold?" may replace "Where's the beef?" as the country's favored slogan. As a matter of fact, when was the last time we audited Fort Knox?

When Cash Is A Position

ronsmith — Mon, 07 Dec 2009 17:30:00 GMT

Last week, in reviewing the charts and price action in most futures markets, I realized the markets have had some intrinsic problems with them. This affected my trade style and caused a certain amount of frustration. The frustration came from seeing trade set ups reverse and set up and reverse. It dawned on me that the problem is where the markets are moving - largely sideways, or markets like gold, setting new 52 week or all time highs accompanied by low volume.

This is not a tradable scenario with our type of software. It is extremely accurate in following the trend, but when there is no trend, Short Term and Long Term lights don’t agree, or in the case of Swing or Intermediate trade styles, the charts don’t have a clear fresh cross, angle or separation on one or more timing lights. In these cases, the software is doing its job. We don’t try to pick tops or bottoms, but try to take the chunk out or the middle.

Be patient for the breakout of the channel and ride the trend to its conclusion. Usually, the movement after the break out is rapid, and the width of the sideways move is the length of the move up or down.

Friday's Non Farm Payroll - Less bad is good to investors

Introspex — Tue, 01 Dec 2009 16:29:00 GMT

The data event with the most impact for this week in the markets is the Non-Farm Employment numbers provided by the Bureau of Labor Statistics. Ahead of this is the ADP numbers based on payroll data.

The recent trend has seen the forecast more optimistic than the actual, with a nice upside revision to the previous month’s numbers. The net affect is that the data released on Friday of this week should be volatile.

The current month’s numbers are released, and the markets are disappointed, but then shortly after that the markets are encouraged by a revision of the previous month’s data, and finally the buying in the markets weakens the USD.

What continues to engage me in these monthly data releases is the change in mentality that the markets have undergone in the past three years. Prior to June 2008 the markets were disappointed when we would add fewer that 130,000 jobs to keep up with population growth and immigration. Now the market bulls make a showing if we just lose fewer jobs than the previous month.

If you trade news events but have never traded Non Farm Payroll, be sure and paper trade this event before going live.

Keeping Things in Perspective, Part II by Scott McCormick, CMT

Mr.MACD — Wed, 25 Nov 2009 19:59:00 GMT

Keeping Things in Perspective, Part II

By Scott McCormick, CMT

In part one of “Keeping Things in Perspective” I focused on the actual returns of the SPX, Gold, and the U.S. Dollar Index. I also alluded to the fact that I have been noticing changes in short term market behavior, the same thing that lead me to conduct a long-term analysis of the SPX this time 2008. Another reason why I feel compelled to look at things from a longer term perspective is because of the type of commentary that I have been hearing regarding Gold and the DX in particular. What I found is important, and could possibly impact all markets over the next three months.

The Standard and Poor’s 500 Large Cap Index, has risen 63.4% in the last 8 months (6 times the current average annual expectation for the SPX) from it’s March 2009 low of 666.79 recovering roughly 50% of it’s overall decline from the October 2007 high of 1576.09. Obviously the trend since March has been up, but relative to the October 2007 high the trend is still down, and we have approached an area that represents relatively little reward for the Bulls, unless it breaks out beyond the resistance levels that we have approached. As trend analysis goes, the SPX has been bumping up against a downtrend line which is connecting the October 2007 high to the May 2008 high. In addition to testing this trendline the SPX is also trading at or near three different Fibonacci levels ranging from 1115.07 to 1135.87 (a closing above 1135 should be significant). The rally since the March low has been accomplished in two swings on the weekly chart. The first swing was from the March low of 666.79 to the May high of 956.23 (roughly 289 points) and the second swing from the July low of 869.32 to the most recent high last week of 1113.69 (roughly 244.37 points). As swing analysis goes, typically you will find that the market will move in swings of three to five waves, and swings one and three tend to be approximately equal in length. If this holds true again the difference between swing one and swing two is now 44 points, or roughly 4% of the SPX’s closing price from November 25, 2009 which would be a target of roughly 1158-1160.

As I pointed out in the performance numbers since October 2007 Gold has been the better performer on a relative basis to the SPX. What is concerning though is that not only is it reaching all time highs, but the trend has been accelerating, which creates a parabolic appearance. When one thinks about markets going parabolic thoughts of Crude Oil in 2008 and the Nasdaq in 2000 come to mind. In comparing the angles of those other parabolic markets to Gold I found that from the Nasdaq lows in 1987 to the highs in 2000 the angle of ascent was 38 degrees (a normal market is closer to 45 degrees). Crude Oil’s angle of ascent from it’s lows in 1998 to its high in 2008 was approximately 31.5 degrees. Currently the angle of ascent of Gold is 33 degrees from it’s 1999 low of 253 to it’s current high of 1187. Now just because the angle is this steep does not mean that Gold is going to stop tomorrow, but since it is trading at an angle greater than 45 degrees it is showing a rather irrational market. In percentage terms comparing the three moves, the Nasdaq rallied 1700% from its 1987 lows, Crude Oil rallied 1300%, and so far Gold has rallied 469% since it’s lows. In comparison to the other parabolic markets Gold looks like it has more to run, which it may, but not without increased risk. One of the tools that I prefer to use to get specific technical levels at which Gold may encounter resistance, in this case, is a Fibonacci extension. Based on swings on the monthly chart going all the way back to 1970, Gold may encounter short term resistance near $1229 to $1256, should the commodity rally through these levels the next cluster of Fibonacci levels comes in at $1458-$1495.

While the focus has been to the upside for the SPX and Gold, it’s is just the opposite for the DX. The DX has been in decline since July 2001, with some interruptions along the way, most notably the rally from December 2004 through November 2005, and more recently the rally from March 2008 through November 2008 and March 2009. Although my focus is on the actual continuous futures contracts of the DX, please remember that it is an index of 6 currencies so when analyzing the DX you have to consider all other components as well. Although it is beyond the scope of this blog the weighting of the Dollar Index is as follows: Euro Dollar 57.6%, Yen 13.6%, Pound (Cable) 11.9%, Cad (Loonie) 9.1%, Kronas (SEK) 4.2%, and Swiss Francs 3.6%. The largest weighted currency is the Euro, and second largest is the Yen. Should the Euro and Yen both encounter resistance it would provide a great deal of support to the DX. As support levels go for the DX the big one is it’s March 2008 low of 71.05, but it may also find support before reaching that level. The first breakout for the DX occurred at 72.64, the second breakout at 74.06 as it worked out of the lows in early 2008. In addition to these price levels a Fibonacci level of 74.95 and 73.12 may provide support. As of this writing the DX is trading below 74.95, but what needs to be watched is whether or not the index recaptures this level without moving to the support levels below it, this would be a sign of DX strength.

So what is all of this saying? I am stating that the current up-trends in the SPX and Gold remain in tack, and the down-trend in the dollar also remains in tack. However all three markets have approached levels that represent higher risk for staying in the trade, than getting out, and as the markets approach resistance levels and support levels it increases the possibility of profit taking in the equity and gold market, and short covering in the dollar. What I mean by increased risk to stay in the trade is this; if you consider your reward to risk ratio in your trade as your trade risk the closer the trade gets to the reward target to more risk is present in a trade. This will cause market participants to seek profit taking opportunities or look for breakouts above resistance or below support levels which changes the dynamic of the reward to risk ratio back into the favor of reward. Having provided the resistance for the SPX and Gold, and the support levels for the DX it is also necessary to know the opposite side of the trend that would indicate a possible reversal, and therefore confirmation of the levels provided. Currently the short to intermediate support level for the SPX is 1019-1029, Gold is 1026.90, and a breakout above the resistance of 76.50 for the DX could indicate again that the markets may be reversing. Keep in mind that in order to reverse an up-trend the market needs to make a lower low and a lower high, and for a down-trend reversal a higher high and a higher low needs to be made. So the levels mentioned should simply raise your awareness that something is happening, not that the trend has actually revered.

And, The BIG Winner (so far) Is....

ronsmith — Wed, 25 Nov 2009 18:26:00 GMT

Are you ready for this? Copper! Old High Grade out performed every other tradable contract since December 2008. From its low in December of 1.274, Copper has risen 150% to 3.179. Ok, get picky, it’s 149.1%. In dollars terms, discounting the fall in USDX value, its contract value is up $47,250 on Initial Margin of 6,075. If copper is a barometer of global economic health, we must be okay.

Second on the list of gainers is Silver; up 67%. Silver far exceeds Gold in percent gain. Heating Oil is up 65%. Crude Light brought in a 42.28% increase so far this year. NASDAQ leads the indexes with a very good 42.86% followed by the Russell’s 38.27%. Finally, COMEX Gold gained 35%

The biggest loser so far this year is Natural Gas with a current 38% loss from last year. Running second is Wheat, down 20%, third is Corn down 15% and Lean Hogs down 13% for the year.

The gainers this year far exceed the losers and the prospects seem good for the trend to continue as long as the dollar drops.

Keeping Things in Perspective, Part I By Scott McCormick, CMT

Mr.MACD — Wed, 25 Nov 2009 00:45:00 GMT

At this time a year ago the equity market was looking into the abyss, and today I heard commentary that gold is going to the sky, that money should be put into equity markets around the globe, and that the dollar is never coming back. The polarity between the news from last year and today is startling. The current commentary may be true, only time will tell, but it amazes me how quickly market participants forget where the markets have come from (which is why patterns repeat over and over again in the market).

A year ago after buying shares of the SSO (Proshares Ultra Long SPX ETF) on November 14^th and November 21^st, ironically, I thought that I should conduct a long term analysis of the SPX because I began to notice a change in the short term behavior (bold on purpose) of the market going into those two days. On Monday November 24th I put together what turned out to be an internal research report for the local branch of my old firm. I had concluded that the November 2008 low was a 5^th of a 3^rd wave, for you Ellioticians out there, and that the equity market should bounce form the November low of 741.02 for the SPX (market rallied 27% over the next 7 weeks). We all now what happened from there, but I thought that it would be interesting to look at the last year’s percentage changes in the markets that seem to be getting all of the headlines, the SPX, Gold, and the U.S. Dollar Index and put things into perspective with the longer term picture.

On a closing basis, the SPX from the closing high (1565.15) in October 2007 to the closing low (676.53) March 2009 fell some 888.62 points, or 56.78%, in 17 months. Since the March low the SPX has rallied 429.12 points, or 63.4%, in less than 8 months. Over the course of the last 25 months the SPX is still negative by 29.3%. During these same periods Gold was able to provide positive returns, but not without some volatility along the way. From October 2007 through March 2009 Gold rallied 23%, from March 2009 through November 2009 it has rallied 28%, and overall for the last 25 months it has rallied 58.4%. Even though gold performed well relative to the SPX during all three periods, please remember that Gold also declined from 1033 in October 2008 to its lows in March 2009 at 681 (a decline of 34%). The U.S. Dollar Index (DX) showed relatively smaller swings during this same time frame. From October 2007 to March 2009 the DX actually rallied 10.95%, not bad for an economy that looked like it was going to sink into the abyss. As the U.S. Government stepped in to keep the economy from sinking the dollar began its slide from March 2009 through November 2009 and so far has declined 15.7%. During the scope of the last 25 months the DX is down 4.32%, again not bad considering where we have been, and what may come.

So where does this put the markets now? On a relative basis Gold continues to outperform equities in the long term (last 25 months), however in the short term (last 8 months) equities have been beating Gold hands down proving to be a better bet against the threat of inflation (the same lesson that was taught to the markets in the early 80’s). Both the SPX and Gold continue to outperform the DX. So this is what the trade has been, own more equities than gold, and own more of both than U.S. dollars. How long this trade continues is anyone’s guess, but just like I began to see a change in behavior of the short term markets last year, I am again noticing changes in the short term behavior now for all three markets, not just equities. In the following blogs I will provide a closer long term technical look at the three markets to keep things in perspective.

Thanksgiving Thursday

ronsmith — Mon, 23 Nov 2009 16:27:00 GMT

Thanksgiving is my favorite holiday although to my knowledge it is of no real significance to any other country other than the United States. It speaks volumes as to the difference between the United States and all the other countries in the world. If I started listing items for which I can give thanks, so many could be called trite because they seem commercialized into insignificance, but the one thing that heads my list: I am thankful for friends and family.

The main text in the volume of differences between the US and the world is not celebrating another conquering of another vicious enemy, or some successful high risk space conquest, nor even some religious holiday. It is that on one November day, we as a nation are thankful for Food, Friends and Family; nothing more than just friends and family sharing a meal together. Wouldn’t everyone want to celebrate that?

So to you, my Wizetrade friends, I thank you for being here with me all the other working Thursdays of the year, and I hope this Thanksgiving Thursday you are able to visit with your friends and loved ones over good food. It’s the best thing in life.

Natural Gas: It is what it is

ronsmith — Thu, 19 Nov 2009 16:42:00 GMT

QUESTION: I opened candlestick charts for Natural Gas. I was using a day chart, a 60 minute chart, and a 240 minute chart, in order to compare what happens with the RSI and MACD and Stochastic on all of them. My question has to do with any price rises in Natural Gas. On the hourly chart and the 4-hour chart, we get into a high range on RSI and MACD, etc if we get just a 10-20 cent rise in price.

Little wonder we cannot get a more prolonged rise in price because traders see the overbought signal and immediately sell it off, and hence we keep getting lower bottoms. At the lower bottoms we finally get an oversold indicator, and thus the sellers lay off for a while. All the while, on the day chart, the RSI and MACD and Stockastics give us a way oversold reading for the past couple weeks.

If we are to ever mount a sustained price rise in Natural Gas to get it over $5 again and approach $6, which is where I think it ought to be for winter, how are we to get a reading on the 60 and 240 minute charts that are not overbought so that the sellers don't come in and sell it off again? Will we get such a chart? Or do we just have to have a prolonged overbought reading on these two charts in order to get the day chart to finally rise above its oversold area and rise up above the 50 mark finally? And what should I be watching for to know that "this time" it will work and the sellers won't come in and sell it off based on the overbought readings on the 60 and 240 charts?

ANSWER: There are several points I want to address:

1) The rises you are seeing in Natural Gas in the 60 and 240 seem to be counter trend moves. These may represent sellers taking profits rather than a sudden demand spike backed by massive buying. If I were being forced to sell (fill) from a short seller’s initiated buy order, I would want a pretty good premium in there for what I know may be a precarious position. The difference in the bid-ask may be greater than normal and if the seller “markets” out, the jump up in price may cause lagging indicators like the MACD, RSI and Stockastics to react violently due to the sudden reversal in trend in the lower minute charts.

2) The change in direction for the market may come about with continued RSI in extremely high ranges while the market continues to move higher in price.

3) Your conviction of a $6 fair price may be accurate and not come about for six months or after the market has fallen to $2.25. If it reaches the $6 price level, it will happen when it happens, not necessarily when or if we want it to. It is what it is.

4) Bottom or Top trading requires deep pockets. It is contrarian, the riskiest of trading and the rewards can be fantastic if one is willing to take a series of losses before catching the favorable trend. The contrarian must use proper money management techniques to preserve capital until the tide turns.

Commodity Futures Trend is Up!

ronsmith — Mon, 16 Nov 2009 18:04:00 GMT

The general trend for all commodities is up (according to lights and charts and price action) with the exception of Feeders and the USDX. The dollar, with today’s low currently at 74.965 is testing out last week’s low of 74.855. This is the trend and the trend is hard to stop. More downward price action past 74.855 may confirm the continuation toward 71.05.

The Global Oil Scam featured in “Seeking Alpha” by Phillip Davis describes a conspiracy to inflate the price of oil by Goldman Sachs, Morgan Stanley, British Petroleum, Shell Oil, Deutsche Bank and Societe may have ripped of $2.5 Trillion in the scam. The Intercontinental Exchange (ICE) is currently the source of “dark pool” trading in the commodities and futures markets. See story: click here It operates outside the US and is therefore not regulated by US laws.

The IEA says rising Crude Oil prices risk derailing the global economic recovery. See story: click here. The Paris-based agency said it expects global demand to rise next year, revising it’s outlook for consumption by 140,000 per day. At $79/Bbl , crude is up 78% this year.

Another subject of debate, “peak oil” which is of dubious credibility, found some legs with the revelation data by a whistle blower at the IEA of a distortion of global inventory and of US Department of Energy duplicity and possible pressure on IEA in the concealment of shrinking inventory numbers so as “not to scare” the Americans. See story: click here.

So, the question is: Did speculators, accused in the first article of price manipulation and rip-off, trade based upon conspiracy to shove crude oil prices artificially higher, or were they taking advantage of supply/demand fundamentals to shove the price of crude oil higher, or both? Are they now saying that rising prices will slow the economy or will it just be the lack of enough oil, or both?

The truth is crude oil prices are higher.

In other news

The total volume of side-by-side trading in CME pit-traded Meats and Lumber futures is indicating with consistency that the electronic trading volume on Globex has become the majority of the entire volume for these products. Effective Tuesday, December 1, 2009, clients using MF Global's Mtrade and EXPRESS front-end platforms will have Meats & Lumber orders directed to the Globex trading platform. As of the close on Monday, November 30, the pit-traded symbols for these products will be disabled in both Mtrade and EXPRESS.

See, we told you the Meats would eventually go all electronic trading. The pits are dead. They just don’t know it yet. Go Electric Meat!

Intraday Timing. Do I know it when I see it?

ronsmith — Wed, 11 Nov 2009 17:37:00 GMT

I just reviewed the Wizetrade "Trade Simulation" workbook and also the "Quick Ref Guide" for the Intra-Day Trading Style. I bought all the Trade Simulations and I feel the Commodities Simulation was done the best!

The time periods as you know are 15 min FAS, 10 min AS, 5 min FAS and 3 min AS.

But I am confused in the proper priority order in evaluation the time periods?

For example, do you watch the 3 min light for a FAS every 3 minutes (even 3 minutes on the wall clock i.e. min 03, min 06, min 09, min 12 etc?). Then when there is a FAS then look at the 5 min for angle an separation on the even 5 min interval, then work your way up to the 10 min and finally the 15 min on an even 15 close of clock time?

OR, do you start with the 15 min time period on the close of the 15 min clock, i.e. min 15, min 30, min 45, etc? Then if there is a FAS on the 15 min, do you then look at the 10 min, and 5 minute periods for the FAS and AS?

I guess, I am confused on how to sequence the order for evaluation of the lights, because, I want to have consistency in my trading plan.

This has been a major problem for me ever since I bought Wizetrade Commodities four years ago.

Thanks for all your help.

Sincerely,

Edward Jacques

You have a great question, Edward: Timing, do I know it when I see it?

In the first progression, you are right; smaller lights make bigger lights. In the second instance, the trend must have started in the 5, then 10, and now the 15 minute chart and is worked its way through to the 45 minute chart. Both are correct if you are looking at a fresh interval in the 15 minute.

I see them as a group. Are they in alignment right now? If not, why not? What does it take to bring them around? Is the 10 minute FAS too old? Is the 30 FAS too new? So, I look at the smaller light’s charts to give additional info before I enter. But, you are right, the 15 needs to be a new interval.

This is why I like Jim’s Single Method so much. Either it is there or it isn’t. No ifs or buts. You have it or you don’t. Simple!

The Crude Oil World

ronsmith — Mon, 09 Nov 2009 17:31:00 GMT

Recently I had an opportunity to sit down with the head of an international security firm for civilian transport vessels. Although the discussion of pirates around the Horn of Africa was the main topic, eventually the subject drifted to American oil supply. There were some eye-opening comments made by him as to the extent of a crisis developing for US consumption of oil.

Because of the continuing limits to drilling on US soil from environmentalists backed by Middle East-OPEC money, the US is going to find itself outside the loop on oil inventories. Because of our foreign policy in the Middle East, we are fighting a losing battle on every front, politically, socially and militarily. Even if we are victorious on the battlefields, we have been out maneuvered by Britain, China, Russia and Iran.

Iran is now in control of southern Iraq’s oil fields and eventually will take total control of the entire country including the Kurds. Its influence is greater than the Saudis, and if Iran wanted Saudi Arabia as a satellite country as Iraq will soon be, it could take it. Its ability to spread descent, coupled with guerilla warfare (Hamas and Hezbollah) to dismantle governments as it did in Syria and Lebanon and is doing currently in Palestine and Afghanistan makes it the most powerful nation in the Middle East. It was formerly known for centuries as Persia. The Persians were “king makers” as described in the New Testament as Magi. No king had permission to become king, even of Israel, without their consent.

Iran is running out of oil like the Saudis, hence their determination to have nuclear power and, as a bonus, nuclear weapons. Iraq arranged for Great Britain and China to develop its huge oil reserve. Thanks, US Army!

China knows it needs Natural Gas now and more in the future, and the nearest, largest untapped field is in the Persian Gulf bordered on the north by Iran. There will be a need for a pipeline from Iran to China. The shortest line runs from the Persian Gulf through Iran, Afghanistan and Pakistan to China. Get the picture? Afghanistan has been partially occupied by US led “coalition” troops since 2001. Pakistan’s allegiance to the US is deteriorating daily as war has broken out with Al Qaeda. Pakistan’s days are numbered. China wants a new world reserve currency to replace the US “deteriorating” Dollar. Who comes out the winner? Iran.

Sugar Charts, the narrow Mid Term Channel

Introspex — Mon, 09 Nov 2009 14:48:00 GMT

I'm watching Sugar trade near the bottom of its range on the Mid Term Chart asw e continue to see strong equity markets and a weak USD along with increasing energy prices. At the G-20 summit in Scotland this weekend, the Finance Ministers vowed to maintain stimulus towards recovery and this has encouraged both equity and commodity investors.

Keep in mind that coming up from support on sugar is counter the current selling pressure, as sugar prices have never regained the $24.85 highs from many weeks ago at the end ov August. he Range is defined between 20.50 low and 23.50 high, Trading near 22.40 this morning.

Corn Prices Today

ronsmith — Thu, 05 Nov 2009 15:54:00 GMT

Corn prices today are down in spite of a weaker dollar. Unusual circumstance, but not that uncommon when grain harvest gets dry weather. This year’s reported corn bumper crop may see a steady decline in price if harvest proceeds and approaches the normal schedule. No buy, hold, or sell here, just an observation. December Corn currently is 383 '0 which is the middle of today's range.

Gold and US Fed Interest Rate

Introspex — Wed, 04 Nov 2009 14:32:00 GMT

Gold is pressing $1100 in the December contracts, and although viewed as overbought in the short term, it is still considered undervalued in the long term. WHY? The US Federal Reserve is widely expected to maintain that interest rates will remain unchanged at near 0% for the near term, and into next year, and this could increase speculation for future inflation. Gold is a hedge against inflation and also benefits from a wek USD, and a weak USD is what we have. The markets are volatile with indecision about risk, and with the Dow capping at 9800, so care should be taken, but things will be interesting at 2:15 pm ET as the Fed announces their policy stance and direction for the future.

Should rates remain at current levels we could see additional USD weakness. If (slim chance) the Fed discusses exits from debt purchases / quantitative easing, it could provide some support for the USD. Stronger USD, weaker commodity prices.

Market Ratio Tables October 31, 2009

ronsmith — Mon, 02 Nov 2009 14:54:00 GMT

Thanks to Marilyn Morgan and George Strom for their Market Ratio Tables posted below. These tables measure the Initial Margin requirement of each market divided by Daily ATR of that market to give the “ bang for the buck” or potential return on margin possible in each market. If markets moved their ATR in a straight line, how many days are required to return the margin. Traders are able to match which markets would offer the best ROM with the Margin limits of their account size. The second table reflects ¼ margin for day traders.

Ranking By Days
#	Market	Days
13	Canadian Dollar	1.68
23	COMEX Silver	1.85
3	Oats	2.04
1	Corn	2.07
7	Wheat	2.11
52	Sugar #11	2.11
11	Aus. Dollar	2.12
12	British Pound	2.14
40	e-Heating Oil	2.16
49	Coffee	2.17
5	Soybean Oil	2.20
4	Soybean Meal	2.23
42	e-mini Crude OIl	2.24
39	Crude Oil (LS)	2.25
14	Euro	2.26
44	Gasoline RBOB	2.30
32	e-mini Russell	2.38
46	e-Lean Hogs	2.42
38	USDX	2.43
16	Japanese Yen	2.47
50	Cotton #2	2.47
45	e-Feeder Cattle	2.53
41	e-HH Natural Gas	2.58
43	e-mini Natural Gas	2.61
47	e-Live Cattle	2.62
10	5 Yr Treas.	2.71
22	COMEX Gold	2.72
26	e-mini Silver	2.82
18	Swiss Franc	2.84
21	Big e-Silver	2.85
6	Soybeans	2.94
24	Copper	2.98
8	10 Year Treas	3.11
2	e-mini Soybeans	3.17
19	US Bond	3.26
20	Big e-Gold	3.32
25	e-mini Gold	3.33
51	FCOJ-A	3.45
9	2 Yr Treas	3.54
17	Mexican Peso	3.90
48	Cocoa	4.21
37	S&P MidCap 400	4.33
27	Platinum	4.52
34	NASDAQ 100	4.80
31	e-mini NASDAQ 100	4.86
33	e-mini S&P	5.02
36	S&P 500	5.08
30	e-mini MSCI EAFE	5.35
35	Nikkei 225	6.39
29	e-mini Dow	7.14
28	DJIA (10)	11.10
15	Eurodollar	21.82

Margin/ATR$ as a Percentage OCT 31, 2009		¼ Intraday MARGIN		10/31/09	10/15/09	10/31-10/15	Top 10
Grain	Symbol		ATR $	ATR %
E-Corn	ZC	372	743	199.73%	169.88%	29.85%	1
E-mini-Soybeans	XK	186	252	135.48%	130.05%	5.43%
Soybeans	ZS	929	1302	140.15%	131.98%	8.17%
Wheat	ZW	591	1139	192.72%	143.85%	48.87%	2
Soybean Oil	ZL	338	580	171.60%	113.44%	58.16%	7
Soybean Meal	ZN	507	871	171.79%	142.22%	29.57%	8
Oats	ZO	270	548	202.96%	191.85%	11.11%
Financial						0
30yr U.S. Treasury Bond	ZB	1080	1272	117.78%	118.24%	-0.46%
2yr U.S. Treasury Note	ZT	270	291	107.78%	99.26%	8.52%
5yr U.S. Treasury Note	ZF	338	471	139.35%	130.77%	8.58%
10yr U.S. Treasury Note	ZN	608	742	122.04%	115.30%	6.74%
Australian Dollar	6A	844	1534	181.75%	143.01%	38.74%	9
British Pound	6B	675	1291	191.26%	173.48%	17.78%	10
Canadian Dollar	6C	608	1407	231.41%	212.01%	19.40%	3
Euro FX	6E	1181	1771	149.96%	130.91%	19.05%
Japanese Yen	6J	1013	1528	150.84%	161.80%	-10.96%
Mexican Peso	6M	625	591	94.56%	66.40%	28.16%
Swiss Franc	6S	1046	1278	122.18%	117.02%	5.16%
Eurodollar	GE	287	54	18.82%	23.34%	-4.52%
Metal						0
Big e-Gold	ZG	1350	1652	122.37%	119.26%	3.11%
Big e-Silver	ZI	2025	2775	137.04%	114.02%	23.02%
Mini Gold	YG	450	551	122.44%	120.89%	1.55%
Mini Silver	YI	405	569	140.49%	119.01%	21.48%
Comex Gold	GC	1125	1692	150.40%	145.87%	4.53%
Copper	HG	1519	2495	164.25%	140.49%	23.76%
Comex Silver	SI	1350	2894	214.37%	183.33%	31.04%	4
Platinum	PL	1519	1390	91.51%	53.26%	38.25%
						0
Indices						0
DJIA (10)	ZD	3250	1175	36.15%	27.17%	8.98%
Mini Dow $5	YM	1625	837	51.51%	38.58%	12.93%
E-mini MSCI EAFE	EFE	2500	1726	69.04%	52.16%	16.88%
E-mini S&P Mid Cap 400	EMD	1875	1679	89.55%	66.56%	22.99%
E-Mini S&P 500	ES	1406	1037	73.76%	55.76%	18.00%
E-Mini Nasdaq 100	NQ	875	671	76.69%	59.43%	17.26%
Mini Russell 2000 Index	ER2	1000	1637	163.70%	117.50%	46.20%
Nikkei 225 (Dollars)	NKD	1563	887	56.75%	47.47%	9.28%
Nasdaq 100	ND	4375	3387	77.42%	59.73%	17.69%
S&P 500	SP	7031	5131	72.98%	55.06%	17.92%
U.S. Dollar Index	DX	399	657	164.66%	156.64%	8.02%
Energy						0
Light Sweet Crude Oil	CL	1519	2594	170.77%	151.94%	18.83%
Heating Oil	HO	1688	2658	157.46%	144.49%	12.97%
Natural Gas - Last Day	NG	1519	2516	165.64%	205.00%	-39.36%
RBOB Gasoline	RB	1688	2814	166.71%	158.83%	7.88%
miNY Natural Gas	QG	422	625	148.10%	185.07%	-36.97%
E-mini Crude Oil	QM	760	1301	171.18%	151.18%	20.00%
						0
Meats						0
Feeder Cattle	GF	338	541	160.06%	146.15%	13.91%
Lean Hogs	HE	355	608	171.27%	172.68%	-1.41%	5
Live Cattle	LE	270	384	142.22%	129.26%	12.96%
						0
Softs						0
Cocoa	CC	875	854	97.60%	113.94%	-16.34%
Coffee	KC	844	1515	179.50%	172.99%	6.51%	6
Cotton	CT	525	884	168.38%	181.33%	-12.95%
Sugar No. 11	SB	525	1016	193.52%	216.38%	-22.86%	7
FCOJ-A	OJ	315	485	153.97%	195.24%	-41.27%

Overnight in the markets and in the news Thursday 10.29.2009

Introspex — Thu, 29 Oct 2009 10:59:00 GMT

Overnight in the markets and in the news Thursday 10292009

Yesterday we saw significant selling pressure in stocks during the US trading session which allowed the USD Index to strengthen and energy prices to move lower with other commodities on the back of a strong USD and some concerns creeping into the markets about the rapid rise in stock values since March and sustainability as we continue to see a slow recovery in Global Economies and pending challenges to growth.

The Asian Markets followed through with selling pressure and the Bears ruled the session. Early European trading was bearish in the first hour, but has improved a little to essentially run flat at this early hour ahead of lunch in London. The markets were encouraged and buoyed by much better than expected employment data from Germany.

US Futures are slightly higher this morning, but pulling back from highs. The USD gave back a little of yesterday’s gains overnight, but would strengthen again if we continue to see selling in equities today.

Earnings from Oil and Gas continue to disappoint but we are waiting for Exxon today and Chevron tomorrow to see if the trend continues. BP and Shell have already shared some gloom this week sighting weaker oil prices on demand and only seeing higher per barrel prices as a result of a much weaker USD.

On tap for news today will be Canadian inflation data; Raw Material and cost of goods leaving the factory (IPPI). These are monthly reports that are expected to show no inflation which supports maintaining current interest rates.

The US will deliver Advanced GDP for the 3^rd quarter, and the forecast / expectation is that GDP saw significant gains. Certainly a weak USD has given exporters an advantage, but the forecast has set a pretty high bar at 3.2% growth. Be careful as the report is released an hour ahead of the open bell (08:30 ET). Weekly unemployment claims will be out at the same time.

US Treasury Secretary Tim Geithner opens testimony before the House Finance Committee at 09:30 am and at 10:30 Natural Gas Storage is out with an expectation that we will continue to see growing surpluses, which could weigh in on the CAD and Energy Futures.

Gold Holdings Comparison

ronsmith — Wed, 28 Oct 2009 09:05:00 GMT

Below is a comparison of Central Bank gold holdings at yesterday’s (October 28, 2009) December Futures price that reveals some interesting information. For instance, I thought China would have an overwhelming amount of gold in relationship to the US. And, I am surprised to see Germany and Italy with such high amounts.

Of course, I am curious as to where the IMF got the money to buy so much gold. I thought they had recently asked to borrow $11 Billion in gold from the US to start its new World Reserve Currency. That would make it the second largest holder of gold in the world. And, finally, is it so hard for the US to go back to the gold standard? With the current amount of Federal Reserve Notes out (?), the value of the “Dollar” to gold may be about .007 cents. How did these banks get their gold?

Amount of Gold Assets held by Central Banks


Rank	Country	Amt in tons	Current value in Billions US$	$1,036	pounds	ounces	$ value
1	U.S.	8946.9	296.61	$1,036	17893800	286,300,800	$296,607,628,800
2	Germany	3749.1	$124.29	$1,036	7498200	119,971,200	$124,290,163,200
3	IMF	3539	117.32	$1,036	7078000	113,248,000	$117,324,928,000
4	Italy	2697	89.41	$1,036	5394000	86,304,000	$89,410,944,000
5	France	2689.6	89.17	$1,036	5379200	86,067,200	$89,165,619,200
6	China	1159.4	38.44	$1,036	2318800	37,100,800	$38,436,428,800
7	Switzerland	1144.1	37.93	$1,036	2288200	36,611,200	$37,929,203,200
8	Japan	841.7	27.90	$1,036	1683400	26,934,400	$27,904,038,400
9	Netherlands	673.8	22.34	$1,036	1347600	21,561,600	$22,337,817,600
10	Russia	625.2	20.73	$1,036	1250400	20,006,400	$20,726,630,400
11	ECB	551.5	18.28	$1,036	1103000	17,648,000	$18,283,328,000
12	Tiawan	485.31	16.09	$1,036	970620	15,529,920	$16,088,997,120
13	Portugal	420.8	13.95	$1,036	841600	13,465,600	$13,950,361,600
14	India	393.5	13.05	$1,036	787000	12,592,000	$13,045,312,000
15	Venzuela	392	13.00	$1,036	784000	12,544,000	$12,995,584,000

New Margin Changes From CME

ronsmith — Tue, 27 Oct 2009 19:38:00 GMT

CME Group has announced new (reduced) margin requirements for all CBOT Grains New Margins click here. This makes leveraging better, but, PLEASE, use margin wisely as It is a two way street, works both ways, a double edged sword, tit for tat, may wreck your account overnight.

Energy appears to be increasing with the exception of Ethanol spreads, and Lean Hogs may be seeing a margin increase from the way Grain VS Lean Hogs VS Feeder Cattle and Live Cattle spreads.

Lean Hogs broke above the sideways channel for the last 12 sessions and may be heading for 5700 or so. The charts are looking good for a long swing trade candidate. The bottom of the channel is 5210 and the high was 54.95. If traders add the width of the channel to the breakout point, the high 5495, a target of 5780. After this high, if achieved, the seasonal selloff in this market may begin with a downside target of 4000. The entire scenario may change with the value of the USDX and the Chinese economic recovery.

February Live Cattle may be heading higher, judging from the charts, so judge from the charts for a break out to the upside of the trend channel on the 180 Minute chart. December Live Cattle’s Short Term chart is red.

December 09 Comex Gold Continues Down

ronsmith — Mon, 26 Oct 2009 15:58:00 GMT

Referring to the October 21^st Blog on Gold, the selloff continues. Wizetrade Commodities charts are in alignment to the downside with angle and separation in the Mid Term chart; FAST in the Short Term chart; and a fresh cross on the 90 Minute chart at 8:00 am on the 23rd and 9:30am today.

MACD Signal crossed over as I expected it might on the 22^nd. The market has now pushed below the10 Day MA and the 20 Day MA stands as a target, currently stalling at 1042.6. The market reached 1049.4 for a low at the start of this writing and is setting new lows as it continues to head south.

Is Dec 09 Gold poised for a pull back?

ronsmith — Wed, 21 Oct 2009 20:22:00 GMT

Today’s prices touched the 10 MA on the downside at 1057.It has been riding on the top side of the 10 MA since October 5^th until October 16^th when it hit the 10 MA at 1050. This move down was a pull back from 1072. The bounce up hit 1070 yesterday. The high today is 1065.7, but the white bar has penetrated the 10 MA. Next target may be the 20 MA at 1034. RSI at 68.10 is pointing Bullish, but the MACD Histogram is almost flat and the MACD Signal could cross over to the downside with a little more downward price action. Tomorrow will give us more info.

US Dollar VS Fed Rate Hike

ronsmith — Mon, 19 Oct 2009 16:36:00 GMT

An article in Barron’s Magazine weekend edition stated the Fed should raise rates because the economy could take it. The question is, “When?”

Bernanke has some tools to use to increase confidence in the dollar and stop inflation. The use of “quantitative ceasing” statements hasn’t helped in that no one knows the exact amount of issued dollars in the “easing” phase. Some harder balls need to be thrown now to stop the drop in the Dollar. Otherwise inflation as reflected in gold and crude oil may become out of hand too quickly to control. Panic may be setting into the psyche of the equity trader and a massive selloff in the Indices seems immanent.

Bernanke stated “colleagues and I at the Federal Reserve believe that accommodative policies will likely be warranted for an extended period.” The recovery in the economy will “not be robust enough to stop increasing unemployment” currently at a 26 year high. “Overall, the Federal Reserve has a wide range of tools for tightening monetary policy when the economic outlook requires us to do so. We will calibrate the timing and pace of any future tightening together with a mix of tools to best foster our dual objectives of maximum employment and price stability.”

Unemployment is projected to peak at 10.5% by the first quarter 2010. And even though Bugsy says the recession is most likely over and the deep depression is averted, a mistimed interest rate hike could upset the upward trend in economic growth. Wholesale prices would fall with a stronger dollar and the Fed doesn’t know how to control deflating prices.

One thing is for certain, when the level in the US Dollar reaches critical mass and starts imploding at an exponential rate, the Fed will raise rates. When? Soon.

China Nurtures Futures Markets

ronsmith — Wed, 14 Oct 2009 12:43:00 GMT

Lately I have been wondering if China would get around to bringing commodity exchanges to their country to offset what it must view as total Western dominance of Gold, Oil, Copper, and Soybeans. Then, this afternoon, Bloomberg’s top story is: “China Nurtures Futures Markets in Bid to Sway Commodity Prices”, in which it is revealed the increasing popularity of Chinese exchanges.

This news comes at a great time since the US Congress contemplates legislation to “tax Wall Street” by taxing each equity transaction up to 0.25 of the “value” of the transaction as punishment for all the economic strife caused by Goldman Sachs, Morgan Stanley and all the other Broker/Banks who collected Billions of dollars in bailout bonuses at the Taxpayer’ expense. So, taxing the taxpayer/trade makes total sense (if you are a member of congress).

Hopefully, the Chinese Exchanges will accept outside speculators to 1) get the NYMEX manipulation of Energy prices under control; 2) stop the Central Banks manipulation of gold; 3) stop Goldman Sachs power trading (some call it carpet bombing) of commodities; and 4) stop speculative trading here in the US and therefore eliminate the liquidity of the commodity markets. Nothing is better than competition.

Taking a Loss

ronsmith — Fri, 09 Oct 2009 08:06:00 GMT

A Futures trader wrote in to me, “I’m good at making a profit, but I can’t take a loss.”

Generally, this is the opposite of what people are capable of doing. They don’t know how to take a profit or when, but they can take losses in enormous proportions to their profits. It really comes down to lack of a trade plan.

A trade plan, a plan that cannot fail, has three parts: 1) entry, 2) exit at profit, and 3) exit at loss. It can’t be that simple, yet it really is. Entering the trade for the same reasons every time (automatically) means that the same criteria for entry is perceived and acted upon. Therefore, the trade has potential, but no guarantee. The trade also has been entered many times before with good and bad results yielding a track record. If no record of overall results exists, then why keep trading it other than to establish a record of results?

According to these records, traders then have knowledge of when the trade has reached a point of limited success. This is where the stop should be placed. They also have knowledge of the point at which the trend is playing out and about to reverse, taking back profits. This is the point at which the profit target should be placed. Everything outside these parameters is conjecture or intuitive and therefore subjective.

At the subjective point, fear and greed take over. The plan that cannot fail is abandoned for speculation. No plan exists from there forward.

This is the way most people trade.

If the same entry resulted in consecutive profits of $5, $10, $3, $2, $5, $10, $7, and $6 and consecutive losses of $25 and $25, then the ratio is 80% win/20% loss, but the loss is $2 every 10 trades.

This is the way most professionals trade.

If the entry yielded average profits of $10 20% of the time, and 80% of the time had average losses of $2, then the ratio is 20% win/80% loss, but the net profit is $4 for 10 trades. Yes, the $5, $3, $2, $7, and $6 profits also stopped out for $2 losses because the draw down to $24 was eliminated. The comeback to those profits couldn’t happen, but then, the $25 loss couldn’t happen either. It’s called “cutting your losers, letting your winners…..”

In reality, most successful professionals are on automatic and immediately set a stop and let the winner run as far as it can. They manage the trade, but with a very small loss potential. They know it’s a numbers game. They live to play the entire schedule of appearances. Most amateurs play only once, blow the account. Fund the account to play three or four more times. Blow the account. Fund the account. Blow the account. Give up and say, “The market took my money!” That too is wrong….a professional took it.

Watch Out For:

ronsmith — Thu, 08 Oct 2009 18:25:00 GMT

Grains: The U.S. Department of Agriculture on Friday will release its October Crop Production Report. A huge corn crop is expected. Perhaps Corn prices will recede because of the mammoth size of the crop, but the Ethanol Industry never had it so good. Prices have fallen since the high in 2008 of $7.65/bushel to around $3.70 today and lower prices certainly make better profits both in green fuels and Cattle.

At the same time, Cap and Trade legislation and California’s recent ruling to slash emissions of “plant-warming” fuels may stop Ethanol in it’s tracks with restrictions of its use through high taxation or (probably) the lifting of tax subsidies, tax breaks and a $0.54/gallon tarriff on imported ethanol. At least we know we have 100+ years supply of something we won’t be able to use.

Rising Gasoline prices are due since the average price of crude oil is around $70.00 per barrel which is up $10 per bushel since July. That rise could help bolster profits ever further.

A side note: All CME markets will close tomorrow (Friday 9^th) at 3:15 for Columbus Day Holiday (Monday, October 12^th). All markets will be open Monday, Columbus Day . Boy, these guys know how to party.

The V Pattern Strategy

ronsmith — Fri, 02 Oct 2009 18:38:00 GMT

Strategy Testing Template

Name: Ron Smith

Name of Strategy: The V pattern

1. In your own words, please write a detailed description of your strategy:

The V pattern begins with the day’s high posted on low volume just prior to the pit markets opening bell. The market plunges through all overnight and current trading session support to the low of the day reaching at least 85% of the ATR. As abruptly as the market fell, it reverses and posts a new high of the day within the same time frame as the plunge down.

2. What trade style would you classify trade strategy?

Usually, this is an extremely active trade. It might be better called an extremely attentive trade style.

3. Typically, what type of profit potential do you see in this strategy?

Total potential is the range of the day. Usual profit is half ATR.

4. Typically, what type of loss or risk could occur with this strategy?

Loss can be minimal if a long position is initiated as soon as recognition of the pattern occurs. Stop is $500 for the e-mini Russell.

5. Is there any particular time of day that you would like to trade this strategy?

Generally in the morning in the Indices the pattern occurs around 9:15a.m.

6. Are there any times you would NOT implement this strategy?

This formation may be seen in any market on any chart which is why John Murphy* called it a “non-pattern” because it is usually recognized in hindsight.

7. Which pairs/stocks/commodities would you consider trading this strategy?

Indices, Crude Oil, US Bonds, and COMEX Gold

8. What is your “Light Setup” for this strategy?

The pattern may appear on as small as a one chart. Whatever chart on which it appears entry timing should be no later than the end of the second interval of that chart.

9. For each chart, please define what you need to see to enter the trade? i.e. FAS, Angle, Angle and Separation, etc.

1) A sideways or ascending channel with a high posted on low volume

2) A sudden reversal of market trend, plunging (like my paycheck in inflated dollars) through support to a new chart low.

3) When reaching the new bottom (this needs to be at least 85% ATR daily basis) the market can be seen turning up.

4) Entry must be before the end of the second entry and preferably immediately after the second interval begins.

10. Is your exit strategy based on price or charts?

5) Stop is below the low of the turn.

6) Target is a tick above the previous chart high.

7) Time frames must match. If it took 90 minutes to reach the new low, it should only take 90 minutes to reach the new high, or get ready to bail.

11. If your strategy is based on charts, define what look you need to see to exit the trade?

12. Is there anything else that should be considered when looking at trading this strategy?

The trade must be constantly monitored.

Please Include at least (3) examples of your trade journal on both entering and exiting the trade, as well as your Trade Manager showing entry/exit.

This strategy was first introduced at WizeFest 2007 in the “Naked Strategies” breakout class. It is on WTV in the “Advanced Strategies” course on Wizetrade University.

* John Murphy, Technical Analysis of the Futures Markets, Page 131.

Market Direction for October, 2009

ronsmith — Wed, 30 Sep 2009 16:06:00 GMT

Market Direction for September did not end exactly as I foresaw.

December Corn after testing the recent high at 347 ‘4, is sideways to down. I will hold to what appears to be a breaking down from recent consolidating to test 275 in October (if the 302 level fails to hold). If the market should penetrate the high, then this becomes a more bullish trend.

November Soybeans’ “good shorting opportunity” (see Monday 9/15/09 on Futures Focus) turned out to be exactly that. It fell to the 902 and therefore may indeed go to the 850 level in October, with Bean Oil and Bean Meal following the seasonal down trend.

December Wheat appears to want to slowly sell below the 400 level by October.

This has to be changed to mid October since October is here.

Copper sold off sharply but has retraced most of that drop. It may continue to decline and I still think Gold and Silver will join in the trend if the USDX trends to the upside target (80) or 82. The politics of these markets clouds the charts. Just remember, gold is a hedge against inflation and a safe haven in turbulent times. It is not a hedge against deflation, and I see deflation in almost every commodity/futures chart.

Bye, bye Hogs! Test out 40.00 for me and maybe 35.00 by October. This obviously did not happen as Hogs trended up to sideways and are currently where they were a week ago.

Live Cattle! Please go down to 82 in November. The Live Cattle market seems to be returning to the down trend.

Crude finally gives up this nonsense of $100/barrel and heads below $60 in the next month or so. $30/barrel, like I said, possible sometime in January. This is still my first choice of time and price, but international politics can change this direction in a heartbeat.

The Indexes need to sell off for a while to get people’s attention. Continuous up trends get boring and people don’t have enough to worry about yet. So a good down turn should sharpen everyone’s vision and get the news talk off unimportant issues like the war in Afghanistan, bailouts, Czars, and government takeover by the revolutionary radical left at the expense of the Bill of Rights. Then, they may sell off further….and further. I see this is the beginning of a major move down. We never did test 6400, did we? We haven't hit 10400 like I thought either. Was today the day for this reversal to begin? The USDX is down and continued trending down will spoil the big drop theory.

As I said in May, interest rates needed to rise, “can’t help but rise.” At the present time, they have retraced to 118ish which is the .382 retracement level if you think Fibonacci numbers. (50% is the 120ish area) from the low of 112’ 25 and the high of 128 ’22.5. People might want to jump into notes and bonds if the USDX strengthens which I think it will. People need cash. But that means investing in US debt instruments, and only the Fed seems interested in doing that. It’s a tough world out here isn’t it, Ben?

Softs all point down to the floor, except maybe Orange Juice. These are probably going to be major corrections lasting months or even years.

So far, Cocoa is in the same place as it was on the 21^st of September. Coffee sold off big time. Cotton hangs around the same area as on the 21^st. Orange Juice, my “exception” sold off handily, but Sugar is up and up big. Surprises are always in store for commodities traders. I still think we will see lower prices ahead in the Softs.

Trade the Plan.

Enough Said

ronsmith — Mon, 28 Sep 2009 18:52:00 GMT

The House of Representatives now has before it a bill, the Federal Reserve Transparency Act, HR 1207, which calls for a complete audit of the fed by the end of 2010. I think Representative Ron Paul’s comments sum up the full meaning for all of us.

“An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.”

Market Direction for September, 2009

ronsmith — Mon, 21 Sep 2009 17:17:00 GMT

December Corn appears to be breaking down from recent consolidating to test 275 in October (if 302 fails to hold).

November Soybeans continues to look like a good shorting opportunity as I said Thursday on Futures Focus as it falls to the 850 level in October, with Bean Oil and Bean Meal following the seasonal down trend.

December Wheat appears to want to slowly sell below the 400 level by October.

Copper is selling off sharply and I think Gold and Silver will join in the trend if the USDX trends to the upside target or 82. The politics of these markets clouds the charts. Just remember, gold is a hedge against inflation and a safe haven in turbulent times. It is not a hedge against deflation, and I see deflation in almost every commodity/futures chart.

Bye, bye Hogs! Test out 40.00 for me and maybe 35.00 by October. Live Cattle! Please go down to 82 in November.

Crude finally gives up this nonsense of $100/barrel and heads below $60 in the next month or so. $30/barrel, like I said, probable in January.

Then they may sell off further….and further. I see this is the beginning of a major move down. We never did test 6400, did we? We haven't hit 10400 like I thought either.

Softs all point down to the floor, except maybe Orange Juice. These are probably going to be major corrections lasting months or even years.

Trade the Plan.

Oil Market Manipulation

ronsmith — Fri, 18 Sep 2009 09:57:00 GMT

Some people believe that the oil market is manipulated by huge speculative funds causing the price to be artificially high. They quickly refer to the $147 per barrel price hit last summer. See Story (click here). The proposed solution is to increase government regulation and decrease the CFTC’s requirements to “prove” manipulation. It is ironic that these proponents never see that speculation also drove the price from $147 per barrel to $33 per barrel in the same year. These oil experts never say what the ideal price per barrel should be, because their only answer is bigger government.

Every politician tells us we need independence from OPEC. At the same time, US Government oil policy regulation decreases the ability to find and extract oil. Rep. Mike Coffman, (R-Colo.), complained the administration already is making it too difficult to drill for oil and asked about the canceled Utah leases. See story (click here).

Perhaps government regulation keeps the price of oil artificially high and speculators take advantage of the situation. The CME is setting forth limits on amounts of contracts speculators can trade as you read this article. See CME Market Regulatory Advisory (click here).

We need government to back off more regulation and let the market place correct the "problem." Once a trend begins, it gains momentum in that direction, and eventually, Wall Street puppets (our congressmen) will find a way to eliminate speculation in all commodities “for the good of the country.” Then the Black Market can open up and the consumer will get a real taste of high prices crippling the economy.

A good explanation of Oil price fluctuations

Introspex — Thu, 17 Sep 2009 14:54:00 GMT

In an article today from Thompson Reuter a fairly good assessment of the recent drivers for the ebb and flow of Crude Oil prices is given.

U.S. Energy Information Administration data showed distillates rose by 2.2 million barrels last week, far exceeding analyst expectations for a 1.3 million barrel build.

And while crude stocks fell by more than expected last week, analysts said this was because of higher refinery utilization rates rather than a genuine pick-up in demand.

"We see no current physical tightness or even an imminent shift to a supply/demand deficit to help push the market higher," said Citi analyst Timothy Evans in a research note, adding, "Some of the barrels have simply been moved downstream."

Gasoline stocks rose by 500,000 barrels in the same period.

Weakness in the dollar helped support oil prices on Thursday as it hit a new 2009 low against the Euro on Thursday as investors shifted money to riskier assets such as equities.

Oil prices tend to rise when the dollar falls because a weak dollar can make it cheaper to buy oil and other dollar-denominated commodities.

"We should remember that there is a big loss of confidence in the dollar and that will lend some support to oil," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.

Oil has moved in tandem with equity markets this year and these have helped tow prices up from around US$32 a barrel last December.

Analysts will be eyeing U.S. jobs data which is set to be released at 1230 GMT (8:30 a.m. EDT) for clues that the economy is really recovering in the world's number one energy consumer.

What I Learned at WizeFest 2009

ronsmith — Mon, 14 Sep 2009 20:12:00 GMT

This year’s WizeFest was the best one I’ve attended. I usually receive more than I give at these events, but this year was exceptional. There was a true dissemination of information among attendees and I took advantage of it.

Mark Douglas

One of the opportunities for exchange came when I was asked to fill in for Mark Douglas because flight delays had cancelled his class. I had nothing prepared. In his class Why Knowing How to Win is not the Same as Knowing How to Produce a Consistent Income Mark was to teach that “trading skills we need to produce consistent results are completely different than the analytical and technical skills we learn to tell us what trades have a high probability of success, where to put our stop or what our profit objective should be.”

The class of over 100 people, the vast majority consisting of Forex traders, listened attentively as I explained the Dow Theory which is the foundation of all technical analysis. I then moved on to the 10 day/20 day moving average crossover, MACD, RSI and other forms of trend confirmation. The idea is to get a series of “witnesses” to increase the percentage of probability for successful entry timing, management and profit potential.

Questions, questions, questions

Most of the class participants went into shock when I asked the first question, “When you see a FAST scenario, how much profit is there?” The question leads to a second question, “Why are you entering a trade if there is no profit potential?” That question naturally leads to another, “How can you justify any amount of risk when you don’t know the reward?”

About ten percent of the class raised their hands in response to “Do you Journal all your trades?” I think a majority of the “ten per centers” Journal their entries and not their exits, but at least they are attempting to keep some form of trading record.

The last question, “Are you the Guru of your account,” brought about my greatest surprise. Less than 30% raised their hands. If a trader is not the Guru’s of their account, who is? Whose information or strategy are they following to give them entry and exit?

In conclusion,

I found the class most revealing. Most traders enter a trade not knowing where the trade will potentially go and therefore have no way to justify risk in relation to the profit potential. Most traders don’t have any record of entries and exits. There are no records to utilize to improve chart analysis or entry/exit timing; the parameters of performance. Therefore, they don’t know enough about their past trading to acquire confidence in either their strategy or themselves.

Is it any wonder traders are apprehensive to trade real money?

Oil ahead of OPEC

Introspex — Tue, 08 Sep 2009 14:05:00 GMT

LS Crude broke through resistance briefly to top out at $71, but has retreated closer to $70 as OPEC meets to discuss production. OPEC has expressed pleasure at current per barrel prices, and it is widely held that production levels will be held unchanged. A weaker USD post G-20 has allowed for commodity strength, but the risk taking in the equity markets has slowed after the open bell this morning. We will need to see continued buying pressure in equities for oil to advance today.