Commentaries on the market
Comments as of close Mon, 3/29/10
Very strong day for commodities and only “reason” heard for this was moderate weakness in dollar and this not enough to justify size and breadth of upside in commodities. Have been noticing some increasing strength in commodities past week or so and this becoming more pronounced. Have to keep in mind that Fed increased money supply dramatically starting in Sept of 2008 and theory is it takes about 15 to 18 months for this to have impact on prices. Now at 18 months from the start of this extreme increase in money supply. If this starting to impact then commodity prices may be headed for a period (two to six months, or longer) of general commodity strength. Have always found that most individual futures traders tend to do best when have general bull markets in commodities so hope this is what lies ahead. What need to add to this potential bullishness would be turn down in dollar and while lines there at moment still very positive, have seen the occasional time where current line pattern (in dollar, euro, etc) does not work. For time being though feel it best to go with lines as they are at moment, meaning long euro and yen, short dollar. If going to see good bull commodity market precious metals should do extremely well and bonds/notes should do very poorly.
June S & P - Status - Neutral (to Bullish)/crosscurrent. Observations - Pattern still indicates sidelines but will not take much up tomorrow to turn it positive. Have some negatives here - series of slightly lower highs/lows in SL and clear down cycle in ML - but not enough to override a solid up trend. This market just not showing any signs of weakness action wise though and price always rules in end. Prefer to stick to sidelines but pressure remains to upside. Bottom line - Lines say sidelines and agree.
June Bonds - Status - Bearish/concurrent. Observations - Trend only slightly down but momentum line pattern remains very negative. Price on small two up days and rule is when pattern this negative can justify initiating new shorts when this happens. Only rule cautioning against this is one that says when both price and SL on or near recent extreme lows and do not have BOTH trend and ML clearly down - ML solidly down but trend just slightly down - tends to be better to wait for further up before shorting. See pattern as negative enough to stick with any existing shorts and if can get little more up tonight/tomorrow see initiating new shorts as justified. Bottom line - Can be/go short with stops still having to be generous at least in 116.16 area on late in day/close basis.
June Euro - Status - Bearish/concurrent. Observations - Pattern remains solidly negative and so continues to fully justify being/going short. Price has now put in two decent up days and as rule can fully justify initiating new shorts when this happens and have pattern as negative as this one. Don’t have any fundamental opinion on currencies at moment and Greece issue seems to be at least temporarily dying down, but as rule when pattern this negative pays to go with lines and they clearly say can be/go short here. Same is true for Pound and Swiss, but Euro pattern a little more negative. Bottom line - Can be/go short with stops still tough to place since still want to sell rallies, not buy on stops, but can use 135.00 on midday or later basis (although could go as high as 135.50 or even 136.00 and pattern would still be negative). Stops on any shorts in Pound, which are fine here, probably need to be 150.50 or little higher on same midday or later basis).
June Yen - Status - Bearish/concurrent. Observations - pattern remains solidly negative with only “positive” fact market short term oversold. Up a little in overnight market and in area of suggested place to initiate new shorts (108.50) at moment. Yen a tricky market though and can made big sudden moves without much warning so is a little risky to be/go short when price and SL on or near recent extreme lows; however, basis lines this fully justified and have to agree. Bottom line - Can be/go short in this area and up to at least 109.00 area or little higher. Stops need to be at least 109.50 up to 110.00 area, probably best to use regular stops in this market.
June Aus and Ca$ - Status - Bullish/crosscurrent. Observations - Good up day and with market in solid up trend this created a crosscurrent buy signal. Today’s strength surprised me since action recently has been so persistently negative. Not the best/most positive of patterns, but as rule when up trend this solid as rule should go with any line pattern buy signal. Aus $ a little stronger than Ca$ at moment and so better to go with that one if go long just one of these two. Rule for crosscurrent buys is they only tend to last two to five days, so should treat these as short term trades. Bottom line - Can go long either/both with stops looking OK just under 90.00 in Au$ and 97.30 - 40 area in Ca$, preferably not entered until midday or later tomorrow.
June Gold/May Silver - Status - Neutral (to Bullish)/crosscurrent. Observations - The negative relative strength indications had on Friday did not produce any weakness today, instead had solid up day. Lack of much down recently while patterns have been negative was and continues to be an upside warning sign, and that warning showed up in reality today. Had positive relative strength indications today since Platinum and Silver much stronger than Gold. Can make minor case for some anticipation longs after today’s big up, but patterns a little too mixed for me so prefer to pass on this for time being. Longer hold in this general area the closer get to having quite positive weekly charts, but for moment these still a little negative. On intermediate and longer term basis am quite bullish on these markets and so hate to pass on any positive signs, but will risk staying out for at least another day. Copper has turned very strong past two days and since all metals markets do tend to move together this a positive for precious metals. Bottom line - lines say sidelines and agree, but longs tempting after today’s big up.
May Crude - Status - Bullish/crosscurrent. Observations - So much for a weak Friday indicating a weak Monday. The idea that negative treatment of Israeli PM by US Pres was due to disagreement over possible bombing of Iran may have been spark that drove up oil prices today. Risk/reward on being short with this possibility is very poor (extremely high risk vs relatively limited reward). Today’s up turned SL up and this produces a weak crosscurrent buy signal, but rule is when up trend solid, as is here, should go with any line pattern buy signal and have to agree. “Should” get some kind of dip tonight or tomorrow to give little better entry point for new longs, but would not look for too much (81.75 would be good, but may not get that low and as rule any price lower on day is good enough). Bottom line - Can go long with stops probably having to be at least 81.00 for time being, preferably not entered until after midday or later tomorrow.
May Corn and Wheat - Status - Bearish/mildly concurrent. Observations - Lines still justify shorts but if hold these areas another couple days lines will turn neutral/crosscurrent. Difficult for me to be bearish these markets when Beans and Meal so strong and COT so bullish so will continue to pass on any shorts, but anytime lines this negative odds will favor more downside until they change. Bottom line - Lines say can be short either/both of these markets and this OK so far but will continue to pass.
May Beans - Status - Neutral/crosscurrent. Observations - Solid up day although did fade a little late. Trend now within margin of error to consider up. ML on slight up cycle but in decent position to sustain up cycle for while. SL on verge of turning up for a clear higher low. Action quite positive as came back exceptionally well from this past Thursday’s big down day giving that day’s down the look and feel of potential “final downside wash out” which can mark significant bottoms. This complex clearly the strongest of group and since beans tend to lead corn and wheat have to see this relative strength as an upside warning sign for group as whole, and especially when add in the long standing very bullish COT data on all in group. See enough positives to be/go long again in anticipation of lines turning clearly positive soon. “Should” get some kind of dip tonight/tomorrow (down 3+ cents at moment) and would view any price below 9.65 as “good enough.” Meal still little more positive than Oil, but would not take much to turn Oil positive in few days or so. Bottom line - Lines say sidelines and this still OK, but once again prefer anticipation longs in Beans (and Meal). Stops probably have to be at least under 9.55 for tomorrow (970.00 in Meal).
May Cotton - Status - Neutral (to Bullish)/crosscurrent. Observations - anticipation longs very tempting in this area since price on good dip and near lows of past month in solid up trending market, but line pattern says sidelines and reluctantly have to agree for at least another day or so. However, as rule does not pay to be/go short when trend solidly up and both price and SL on or near recent lows and this means the reverse (buying when this case) tends to be true. See nothing too wrong with some light anticipation longs in this area as long as willing to hold through any near term weakness and add if see this, but on one contract basis better to wait for more solidly positive pattern. Bottom line - Lines say sidelines and have to agree for another day or so.
Chick Goslin
