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TFC Commodity Trading Forum

A Market Review and Opinion Report For 08/07/2012

Oil continues its volatile and choppy fall as the global economic outlook combined with declining euro currency buying power have helped to break the market. Expect more downside throughout the summer with an eye on geopolitical and hurricane related volatility exposure. Natural gas remains a strong buy and is at a critical juncture in the near term as the reversal on Friday needs to be quickly dismissed in order for bullish momentum to be sustained. Keep in mind that the recommended view on nat gas is a long term out of the money call strategy – not to get caught up in the short term swings.

Stocks remain stuck in a chop after exhausting its rally efforts. The market is near term bearish but overall avoidable as a trading opportunity. The bond market should inversely echo that sentiment. The US dollar is a bull market and fresh two year lows in the euro should clear the way for more upside momentum in the dollar as the liquidation in Europe continues. Monday is a critical momentum establishing day in the currency world. The Japanese yen has been in a tight channel and should breakout to the upside this week despite negative economic data early in the week. I continue to stand by my forecast that:

The Japanese Yen futures will hit 140 before it hits 80 or I will quit writing the Weekend Commodities Review...forever.

The weather rally in the grain sector has far exceeded my expectations and continues to blow a bigger and bigger bubble in a sector that I predict is doomed to collapse after the short covering run loses momentum.

On a daily the cattle market is showing a clear bull flag despite my longer term views of more downside. Hogs are approaching a sell but currently is avoidable.

Gold and silver remain bearish and choppy, and this safe haven flight to quality investment is starting to reflect a bit less consumer and investor optimism. There comes a point where a flight to quality becomes overpriced, and in a global economy that should be more concerned about deflation than inflation it is no surprise that the overpriced argument is helping to build bearish momentum in this sector. Personally I view it as long overdue and expect serious downside volatility in coming months.

Coffee and sugar have experienced a strong rally in recent weeks as wet weather in Brazil and a general commodity rally has helped both these bearish markets exhibit signs of recovery. This is an ideal selling opportunity in both markets with put options recommended long term. Cocoa is a strong sell with a 1500 target by year’s end. OJ has rallied as anticipated but overall this market is avoidable and unlikely to rally much beyond 140.

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