Weekly Commodity Trading Letter
Posted in Commodity News Updates, Futures, Jake Bernstein, commodities, commodity trading, currencies, energies, futures trading, interest rates, market price, tropicals on February 17th, 2009 by Jake Bernstein – Comments Off
COWS (Corn, Oats, Wheat and Soybeans)
The grain and soybean complex markets continue to give mixed signals. They are ideally bullish on seasonals but they are suffering from the supposed economic recession. While the soybean technical signals still read bullish corn signals are short term bearish. Soybeans found support on some of my indicators and rallied strongly. Clearly, however, this has been a very sideways move. My cycle studies and seasonals suggest that significant lows and/or rallies are due in many grain and soybean complex markets by the end of the first quarter of 2009. Following a possible short-term decline the seasonal odds favor a further rally. The markets are acting as expected.
Soybean Complex: I warned you about the major tops and the coming declines well before they started. The corrections came and they were large and persistent, confirming my bearish expectations. I also advised you that short-term buy triggers had developed. Soybeans gave a trigger to go long but with considerable risk. I continue to emphasize the “high risk” nature of all grain and soybean market trades. Await recommendations. Seasonals in the cash soybean market are now ideally bullish. Await recommendations.
Corn: Prior to the current decline I advised you that my COT analysis had turned bearish. Seasonal lows are due now and may well have been made on bullish momentum divergence signals. I believe that corn prices now have the potential to make a very large recovery,perhaps to as high as intermediate term resistance areas. Await intermediate term buy recommendations via the hotline. Cash seasonals are ideally bullish. We need to wait for a new trigger. Short-term triggers remain bearish.
Wheat: Await wheat spread recommendations. As in all the grain and soy complex markets, the swings in wheat will continue to be large and wild. Seasonal is ideally sideways to bearish.
Oats: The market remains short term bearish. The intermediate-term uptrend remains bullish. The decline has taken prices down to important support. There were short-term MOMENTUM divergence buy signals but no MAC signals as yet.
IMPORTANT REMINDER: ALL RECOMMENDATONS GIVEN VIA THE HOTLINE WILL REQUIRE LARGE STOP LOSSES DUE TO ONGOING MARKET VOLATILITY. THERE HAS NEVER BEEN A TIME AS VOLATILE AS THIS – YOU WILL LOSE MONEY IF YOU USE SMALL STOPS. IF YOU CAN’T AFFORD THE POTENTIAL RISK THEN DON’T TRADE. SEE MY LONG TERM FUTURES CHARTS BELOW!
Meats
Cattle and Hogs: My analysis of the COT Commercials positions in both markets continues to project a LONG TERM bull move in all of the meats. However, a trigger is still needed to confirm the rallies. I REMAIN BULLISH HOWEVER I AM WAITING FOR TRIGGERS. I believe that the RECENT decline in hogs is another test of my bullish LONG TERM forecast as well as an important test of long term technical support. IN THE ABSENCE OF BUY TRIGGERS THERE ARE NO buy RECOMMENDATIONS at this time. The hotline recommended long Jun and short April hogs spread that should have been closed out when it reached its profit target. There is an initial buy trigger in the lean hogs. The spread should continue to be valid until late March if history repeats. See chart at right. Seasonals are ideally bullish but we are waiting for buy triggers – please be patient.
Metals
Copper: My comments for the last few weeks were as follows…”We could get a significant short term rally in copper (and all metals). Copper tends to make highs in March. There is bullish divergence. The coming rally could be HUGE!” On Friday 6 February, copper prices exploded which confirms my thought that accumulation of longs by Commercials is in process.
Gold and Silver: Gold seasonals achieved their projected seasonal rally targets and you should have gotten out of longs as recommended. My longer-term forecast based on the long-term cycles and technical indicators currently suggest a $2000+ target when the next cycle peaks.
Silver triggered a short-term buy as did gold. Both markets remain in up trends. Seasonal key date rally in silver continues. I advise waiting until the first few months of 2009 before taking on long term buy (investment) positions even in spite of the current rally.
Gold and silver continue to rally in response to deteriorating economic conditions all over the world. Unprecedented amounts of liquidity injections will, in my view, eventually result in inflationary pressures. The precious metals are reflecting these expectations, however, with my Daily Sentiment Index at 90% bullish I have concerns about a shortterm top that may now be developing.
Platinum/Palladium: My long-term forecasts for platinum and palladium have been bullish and I am still long term bullish in spite of the recent corrections down which were discussed in this newsletter well in advance. The long overdue correction brought prices back to rational levels and I believe that new buy triggers will develop soon. I believe that over the next 12 months we could witness considerable turnarounds in platinum and palladium prices and I want to maintain long-term holdings in PAL. There are short-term indications of lows. I therefore recommend holding on to long term positions, in palladium which may take time to move higher but which, I feel, has significant upside potential. I am holding my personal long-term positions in PAL (North American Palladium). There is short-term bearish divergence. See chart.
Currencies
Aussie $: The market crashed against the US dollar and thereby confirmed by forecast. I also advised you that it was “not unreasonable to expect a short term low” in the Aussie. Such a low is now developing. See chart.
The various economic stimulus plans as well as the turn in metals could very well bring a turn to the upside in the Aussie $ vs./ US$ but there are no new buy triggers as yet. I expect an intermediate term cycle low in the next few months.
Eurocurrency/Swiss Franc: There were persistent and significant technical and cyclical warnings on my indicators of a major low in the US dollar vs. the Swiss and the Euro. I was bullish on the dollar, however, a short-term top in the dollar was expected and it developed. See the short-term chart SUGGESTS THAT a low is not yet in place for the Euro.
Japanese Yen: I have been bullish for many months and I REMAIN BULLISH for the intermediate term, but I advised you to “watch for a short term top at any time now”. I predicted without any hedging that the Yen would become one of the strongest currencies in the world. It has done so. The long-term bull market continues as predicted.
The Yen exploded as predicted. There are sell signals in the Yen but the anticipated bearish divergence that was expected to trigger has done so. There is no change in my analysis. See seasonal chart. The long-term Yen rally may not be over yet.
US Dollar: The dollar gave me clear technical evidence that was expected to mark the beginning of the end to this bear market. A short-term top is being made but there are no clear cut sell triggers as of this writing. The dollar rallied to long-term resistance which is why there has been some hesitation. There are indications that resistance could stop the current rally.
Canadian$: I have good technical and cyclical reasons to conclude that an important top has been made in the Canadian dollar vs. the US dollar. Divergence gave clear warnings of a top or, at the minimum, a considerable downside correction. That has happened.
BrPound: The market has made an approximate 8.1-year cycle top as predicted. I am still bearish consistent with the long-term cycle projection. I advised you last week that a short-term rally is now due. I ADVISED YOU THAT IT WAS not unreasonable at this time to expect a strong recovery rally in this market vs. US dollar but the major trend remains clearly bearish. A short-term recovery continues as expected. Note that the weekly indicators (see chart below) have triggered a weekly buy signal. A major low MAY HAVE been made…!
Tropicals
Orange Juice: There are NO buy triggers as of this writing. Prices continue to fall decline in sympathy with ongoing and persistent declines in many other markets. The chart at left shows how deeply entrenched the bear trend has become. My cyclical work continues to suggest, however, that lows are overdue. Wait for buy triggers. Seasonals are ideally bearish at this time of the year. The BTI/MA indicator is beginning to show signs of a low BUT there are NO buy triggers as of this writing.
Sugar: My analysis of the long-term sugar data suggested that the major cycle, which has averaged approximately 7 years, low to low turned bullish. Short term buy signals developed and the price surge has been excellent. I recommended waiting to buy on a decline to short term (daily) support. The market is likely to bottom near or at long-term support in sympathy with the overall crash in commodities. The shortterm trend is bullish.
Coffee: My long-term cycles continue to tell me that coffee prices are overdue for a major rally that could take prices much higher over the next few months. Coffee is in a major bull market still in its early stages and it has recently tested short-term support. Coffee is a very volatile market that requires considerable risk. Large stops that must be used or you will be stopped out quickly and often.
Cocoa: the trend remains strongly bullish as we go to press. There is no indication at this time of a shortterm top but, as the chart shows, there is bearish momentum divergence. The intermediate and longterm trends remain bullish.
Fibers
Cotton: My recent comments were as follows “In spite of the recent strength in sympathy with the grain and soybean complex the technical picture is still NOT convincingly positive. Short-term sell triggers have developed.
Lumber: Based on my analysis of the cycles, trend, timing and COT data, I advised you that lumber is positioned what could very well be the first stages of a record-breaking price rally. Daily indicators are bullish. Last week prices literally exploded with several limit up sessions. This could be the beginning of the big move I have been expecting. I believe that a long-term bull market is imminent. No matter what I say it is imperative to WAIT FOR A TRIGGER! The market has once again made new lows for the move but the cycles and my COT studies gave strong advance indications of a major low in the offing. Last week I told you that “Now that there are indications of a POSSIBLE short term low the key is to see if prices can follow through to the upside”. So far we have not seen the necessary follow through. As a result of the lack of follow through I have no choice but to wait.
Interest Rates
I have been telling you “the next major move in US interest rates will be to the upside” (i.e. futures lower). My expectation and forecast are based on the 50-60 year long term cycle which now points to higher rates. As the economic crisis goes forward governments throughout the world will have two choices: 1) they can print money and inflate their currency to pay off the debt with cheaper currency or 2) they will have to pay higher and higher rates to finance the debt. A bubble continues to develop. I believe that the ever-expanding financial rescue plans all over the world will likely result in huge interest rate increases in the next few years or even longer as inflation rises. With short term rates at or even effectively below zero the odds of an eventual upside explosion in rates increase daily. I advised you that there were “initial indications of bearish divergence”. The decline continues on a short-term basis. See weekly chart below.
Stocks
I was very clear in my advice to go long on the close of trading 27 October. I showed you the history of this
seasonal back to 1901! S&P futures surged to the upside. Stock market lows that were expected in late October based on seasonals were initially correct. My indicators suggest that short term and seasonal lows are in place. I also advised you to wait for weekly buy triggers in order to be more certain of lows and if you are an investor as opposed to a short-term trader. In some cases there have been weekly triggers. Stocks continue to ignore most bad news which further makes my case for a short term and seasonal rally in stocks. We are approaching a critical date, February 16th which, in the past has marked the start of a lengthy seasonal rally. There are fantastic opportunities developing across the board in many quality stocks. Nonetheless, WAIT for WEEKLY TIMING triggers for entry. Remember that market bottoms are a PROCESS and not an EVENT!
Energies
The energy futures markets collapsed following a period of ABSURDLY AND EXCESSIVE bullish sentiment that created a runaway bull move. Given the length and severity of the decline in all energies the odds of a major recovery rally are significant. I suspect that a rally back to the $70 level is possible. The technical indicators are turning bullish. BUY TRIGGERS which are NOW developing on the momentum charts! RBOB unleaded has turned bullish. Natural gas remains my best bet in the energies but we need triggers. The long position by Commercials as assessed by the COT is breathtaking.
