Futures Market Blog

For the Week Beginning 2 March 2009

Price vs. Time

If you had to make a choice between making investment and trading decisions based on price or on time which one would you choose? The vast majority of traders and investors will choose price. People think about their investments in terms of prices. If crude oil looked “expensive” at $110 then what would we call it at $140? After crude oil fell to under $70 did it look like a good bargain? If it was cheap at $49 then was it a steal at $40? Many stocks are now at their lowest prices in many years. Do these low prices mean that the stocks are bargains or are they lows priced for a good reason? We may very well be tempted to think in terms of price simply because prices now look compared to how they looked 6 months or a year ago. I recommend that you AVOID thinking in terms of price no matter how seductive or attractive these prices may be. Make no mistake about it – the key to success in this market environment is TIMING and not price. I believe that now, perhaps more than ever before, timing will be your key to major profits over the next few years and even the next few days.

Be Careful what you Believe

Given the tenuous economic environment many investors and traders have understandably become very insecure. Their leaders have failed them. Their top thinking economists have failed them. Their brokers and advisors have failed them. And their portfolios have, as a consequence failed them. I look around and I see despair, negativity, bearish sentiment, fear, anger, frustration, indecision, confusion and a few more things that words cannot describe. We are being told that things will get worse. We are being told that recovery won’t be easy. The new President has gone on a public relations campaign to tell us how hard his job is going to be. When things get better he’ll look like a hero. And whether he be a hero or not, the fact is that we are being assaulted daily by news from every aspect of the media. Television, radio, newspapers, brokers, advisors, new experts, old experts, self appointed experts, ministers, Internet prophets, e-mail blasts, SPAM, bus advertising, matchbook ads, and more are giving us a steady stream of bad news. I have a suggestion for you. Think back to when you were being fed a steady diet of good news. Donald Trump and his “rich dad” friend and their pals went on the road with their get rich million dollar seminars all over the country. They packed the house in every major city. Hard working and hopeful people from every walk of life flocked to learn from the experts. The experts told them how to buy real-estate to get rich. They told them how to buy and flip properties quickly. They told them that the steady upward spiral in prices would continue. If you read my warnings – if you attended my Webinars – if you took seriously my persistent warnings that the real estate cycle was topping and that a low was due in 2009 then you fared well indeed. How sad it is that Donald and the other experts led so many hard working people to make serious errors. Yes it’s true that these people were all free to make their own choices. No one held a gun to their heads and forced them to do stupid things.

What this all boils down to is the fact that most investors are like sheep. They are attracted to what is obvious and they are followers as opposed to being proactive. We are now at yet another critical juncture in markets and in economic history. I want to go on record with some suggestions for you that are drawn not only from my over 40 years in the markets but also from my cycles, indicators, timing methods and my understanding of market and trader psychology. Here are some things to consider:

• Be careful what you believe, whom you believe and what you tell yourself. It’s clear that, as usual, the vast majority of experts missed the tops. In fact they didn’t even warn you. Now, after the fact, they’re telling you to be scared. I say that it’s time to think about and to do the exact opposite.

• The simple fact and the simple honest reality is that the vast majority of experts were not only wrong but that they will be wrong again.

• Make your own decisions and be a thinker not a follower.

• My long-term work with the real estate cycle says that 2009 is the year of an ideal or projected bottom. This means that lows are likely forming now while the news is the worst we have seen. Naturally this means that if you’re looking at the market now and evaluating the market based on what you wee then you will believe what the experts are saying. You need to be forward thinking. You need to remember that many of the so called experts who are now peddling disaster are the same as those who were bullish and predicted a continued bull market in real estate or, as worst, a slight slowdown. Most of the experts were wrong then and they’ll be wrong again.

• Now is the time to prepare your shopping stocks, futures and real estate that you want to buy when the next leg up begins

• TIMING is your key. Don’t catch the falling knife!

For the Week Beginning 2 March 2009

Price vs. Time

If you had to make a choice between making investment and trading decisions based on price or on time which one would you choose? The vast majority of traders and investors will choose price. People think about their investments in terms of prices. If crude oil looked “expensive” at $110 then what would we call it at $140? After crude oil fell to under $70 did it look like a good bargain? If it was cheap at $49 then was it a steal at $40? Many stocks are now at their lowest prices in many years. Do these low prices mean that the stocks are bargains or are they lows priced for a good reason? We may very well be tempted to think in terms of price simply because prices now look compared to how they looked 6 months or a year ago. I recommend that you AVOID thinking in terms of price no matter how seductive or attractive these prices may be. Make no mistake about it – the key to success in this market environment is TIMING and not price. I believe that now, perhaps more than ever before, timing will be your key to major profits over the next few years and even the next few days.

Be Careful what you Believe

Given the tenuous economic environment many investors and traders have understandably become very insecure. Their leaders have failed them. Their top thinking economists have failed them. Their brokers and advisors have failed them. And their portfolios have, as a consequence failed them. I look around and I see despair, negativity, bearish sentiment, fear, anger, frustration, indecision, confusion and a few more things that words cannot describe. We are being told that things will get worse. We are being told that recovery won’t be easy. The new President has gone on a public relations campaign to tell us how hard his job is going to be. When things get better he’ll look like a hero. And whether he be a hero or not, the fact is that we are being assaulted daily by news from every aspect of the media. Television, radio, newspapers, brokers, advisors, new experts, old experts, self appointed experts, ministers, Internet prophets, e-mail blasts, SPAM, bus advertising, matchbook ads, and more are giving us a steady stream of bad news. I have a suggestion for you. Think back to when you were being fed a steady diet of good news. Donald Trump and his “rich dad” friend and their pals went on the road with their get rich million dollar seminars all over the country. They packed the house in every major city. Hard working and hopeful people from every walk of life flocked to learn from the experts. The experts told them how to buy real-estate to get rich. They told them how to buy and flip properties quickly. They told them that the steady upward spiral in prices would continue. If you read my warnings – if you attended my Webinars – if you took seriously my persistent warnings that the real estate cycle was topping and that a low was due in 2009 then you fared well indeed. How sad it is that Donald and the other experts led so many hard working people to make serious errors. Yes it’s true that these people were all free to make their own choices. No one held a gun to their heads and forced them to do stupid things.

What this all boils down to is the fact that most investors are like sheep. They are attracted to what is obvious and they are followers as opposed to being proactive. We are now at yet another critical juncture in markets and in economic history. I want to go on record with some suggestions for you that are drawn not only from my over 40 years in the markets but also from my cycles, indicators, timing methods and my understanding of market and trader psychology. Here are some things to consider:

• Be careful what you believe, whom you believe and what you tell yourself. It’s clear that, as usual, the vast majority of experts missed the tops. In fact they didn’t even warn you. Now, after the fact, they’re telling you to be scared. I say that it’s time to think about and to do the exact opposite.

• The simple fact and the simple honest reality is that the vast majority of experts were not only wrong but that they will be wrong again.

• Make your own decisions and be a thinker not a follower.

• My long-term work with the real estate cycle says that 2009 is the year of an ideal or projected bottom. This means that lows are likely forming now while the news is the worst we have seen. Naturally this means that if you’re looking at the market now and evaluating the market based on what you wee then you will believe what the experts are saying. You need to be forward thinking. You need to remember that many of the so called experts who are now peddling disaster are the same as those who were bullish and predicted a continued bull market in real estate or, as worst, a slight slowdown. Most of the experts were wrong then and they’ll be wrong again.

• Now is the time to prepare your shopping stocks, futures and real estate that you want to buy when the next leg up begins

• TIMING is your key. Don’t catch the falling knife!

COWS (Corn, Oats, Wheat and Soybeans)

Soybean Complex: The bull market corrections that I warned you about came. They have been large and persistent but they are near an end. I advised you that short term buy triggers had developed in the soybean complex. Soybeans gave a trigger to go long but with considerable risk. Seasonals are ideally bullish. Support is being tested. Sentiment is low. Conditions are now right for a bottom. Await recommendations via the Internet hotline. See chart below – it shows that my Daily Sentiment Index is not yet low enough for prices to make a short term bottom.

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 that are now being tested. I continue to believe that corn prices have the potential to make a very large recovery, perhaps to as high as intermediate term resistance levels. Await intermediate term buy recommendations via the hotline. Cash seasonals are ideally bullish but wait for a new trigger. Short term trend remains bearish.

Wheat: Await wheat 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. Short term trend is down.

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. The near record high net long position by commercials (see chart below) is one of the most bullish long term developments I have ever seen in oats but a buy trigger is essential in order to confirm COT commercials bullish potential.

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 RISKS THEN DON’T TAKE THE TRADES. SEE CHARTS BELOW!

Meats

Cattle and Hogs: The COT Commercials positions in both markets continue to project a LONG TERM bull move. However, a trigger is still needed to confirm the rallies. I REMAIN BULLISH HOWEVER I AM WAITING FOR timing TRIGGERS to go long. I believe that the continuing decline in hogs is another test of my bullish LONG TERM expectations as well as an important test of long term technical support and cyclical support. There was a short term buy trigger in lean hogs. A long was recommended and should have been closed out per stop loss instructions. See chart below. Seasonals are ideally bullish but we are waiting for buy triggers – please be patient. Note the very low reading on my Daily Sentiment Index chart for CATTLE at right. Odds favor a low. I believe that traders are over-reacting to bearish economic expectations. The COT data, however is bullish.

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. Still short term bullish.

Gold and Silver: Gold seasonals achieved their projected 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. My next cycle low is due in the first half of 2009. This casts some doubt on the current bull trend status. Silver triggered a short term buy as did gold. Both markets remain in up trends. Seasonal 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. See my daily sentiment chart below.

Gold and silver continue to rally in response to deteriorating economic conditions. Unprecedented amounts of liquidity injections will, in my view, eventually result in unprecedented inflationary pressures. The precious metals are reflecting these expectations, however, with my Daily Sentiment Index at 90% bullish I have concerns that a short term 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. 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. The strong recovery in platinum is reasonable considering the size of the correction down but precarious market sentiment situation in gold, as noted above, should be a red flag to bulls that a significant short term downside correction may be coming soon.

Currencies

Aussie $: The market crashed against the US dollar and thereby confirmed by forecast. I advised you that it was “not unreasonable to expect a short term low” in the Aussie. Such a low is now developing. See chart below. Some of my indicators have turned short term bullish. 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$.  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 has developed. See the short term chart below SUGGESTS THAT a low is developing in the Euro vs. US dollar.

Japanese Yen: I have been bullish for many months and I REMAIN BULLISH for the intermediate term, however, I advised you to “watch for a short term top at any time now”. Well before the current bull market started 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. Nonetheless, there were short term sell signals in the Yen. The anticipated bearish divergence that was expected to trigger has done so. There is no change in my analysis. See chart below. 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 but I need to see a weekly buy trigger to confirm this possibility.

Tropicals

Orange Juice:  There are NO buy triggers as of this writing. Prices continue to 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 chart below shows that this is the lowest small trader sentiment (Jake DSI) since the 2004 major low.

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 short term 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. Bearish momentum divergence led to a short term top that is still in process as we go to press. The intermediate and long term trends remain bullish but the short term trend is down. See chart below.

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 and a down trend remains in effect.

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. Recently prices literally exploded with several limit up sessions but there was no follow through and there were no buy signals on my indicators. 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. As a result of the lack of follow through to the recent sharp rallies I have no choice but to wait for triggers. See COT chart below.

Interest Rates

I have been telling you that “the next major move in US interest rates will be to the upside” (i.e. futures lower). I AM CONFIDENT IN MY FORECAST which is based on the 50-60 year long term cycle that now points to higher rates for an extended period of time. 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 in interest rate futures. 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 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. I 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 approached a critical date, February 19th 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! That process is unfolding with daily sentiment now in an area that can support a meaningful low for, at the least, a strong short term recovery.

Energies

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! The long position in natural gas by Commercials as assessed by the COT is utterly astounding. Monday 23rd February marks the start of a probable high odds seasonal rally.

02.11.09

There was a discrepancy between two major reports concerning crude stocks for the latest reporting week. On Tuesday evening, The American Petroleum Institute said that crude stocks unexpectedly declined by 2 million barrels to 344 million barrels. Prior to this, crude stocks had increased 18 of the last 20 weeks. Additionally, demand for crude oil and its products have generally declined due to the worldwide economic contraction. Other market observers have pointed to the probability that OPEC was complying with a self-imposed production reduction. On Tuesday, crude oil fell by over two dollars. Crude oil is down 15% for the year and 60% below the highs of last year. OPEC pumped 29 million barrels a day of crude in January, down 950,000 barrels a day from December. The IEA has cut its global demand projection for 2009 by 1 million barrels a day due to the world economic contraction.

At the same time the IEA warned that a reduction in production investment could eventually lead to a price rebound. Going into the Department of Energy report, traders were looking for an increase of 2.75 million barrels of crude. The DOE subsequently reported a surprising decrease in gasoline inventories. For the latest week, gasoline fell by 2.66 million barrels to 217 million barrels. Traders had been looking for gasoline inventories to have declined by 50,000 barrels. On the   release of this news, gasoline was higher by 5.5 cents. As the session wore on, the higher gas prices could not hold up the complex however and crude headed to its lowest levels of the day by the close.

A story which speculated that the International Monetary Fund would not have to sell part of its gold reserves even though the global economic crisis has renewed demand for loans from the organization ignited a sharp rally on Wednesday.  Last April, the IMF sold over 400 metric tons of gold to address a deficit. Ironically, now that the world is experiencing a general economic slowdown, loan demand is increasing. Because of this, the IMF does not need to sell gold. The IMF will be lending almost $40 billion to various countries affected by the world economic contraction. The increase in loan activity means that the IMF’s income will be increasing thereby removing the need to sell gold. The IMF is sitting on the world’s third-largest gold reserve, over 3200 tons. Additionally, gold is being looked upon as a currency not as a barometer of inflation. Consequently, it’s apparent that the least path of resistance for gold is to trade towards $1000 an ounce, then seek justification for this level then sell off sharply by $150 over two days. Another reason behind the recent advance was a Response to the Sec. of the Treasury’s presentation on Capitol Hill Tuesday of the recently reengineered bank bailout program. The presentation was not well received however and left open more questions than it answered. Consequently, the stock market declined by 4.6% and gold found more buyers. Platinum flew higher to its best level since October on investment demand.

Coffee was higher for the first time in three sessions on Tuesday but was lower on Wednesday. The reason for better prices on Tuesday was a reduction in exports from Indonesia. Money flow in coffee is positive but could reverse on a lower close on Thursday.

Money flow sugar is positive but also could flip lower on a lower close on Thursday. Exports from India may increase by 20% next year as higher local prices for farmers induce them to plant more sugarcane.

Corn and soybeans were both lower on Wednesday. Money flow for corn is positive and lower levels will uncover buyers. Money flow is positive for soybeans as well but the intermediate trend could flip lower if prices close lower on Thursday. Prices were lower on Tuesday in response to skepticism for the financial rescue package promoted by the Secretary of the Treasury.

Global corn demand is expected to be lower by .07% from January’s projection. The USDA continues to see economic contraction damaging world demand.

Chuck Kespert

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING.

FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

COWS (Corn, Oats, Wheat and Soybeans)

The grain and soybean complex markets continue to give mixed signals. 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. Despite the mixed short-term signals, my cycle studies and my seasonals suggest that significant lows and/or rallies are due in many markets by the end of the first quarter of 2009. Seasonal patterns in soybeans agree with the current rally. Following a possible short-term decline the seasonal odds favor a further rally. Corn and soybeans should rally based on seasonal patterns. Penetration of January highs is critical to a new bull market.

Soybean Complex: I warned you about the tops and coming declines well before they started. The corrections came and they were large and persistent, confirming my expectations. I also advised you that short-term buy triggers had developed. Soybeans gave me a trigger to go long but with large risk. I emphasize the “high risk” nature of all grain and soybean market trades. Await recommendations. Seasonals in the cash soybean market are now ideally bullish.

Corn: Prior to the current declines I pointed out that my COT analysis had turned bearish. Seasonal lows were due 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 are 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!

Meats

Cattle and Hogs: My analysis of the COT Commercials positions in both markets projects a LONG TERM bull move in both of the meats. However, a trigger is needed to spark the rallies. I REMAIN BULLISH BUT 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. The hotline recommended long Jun and short April hogs spread that should have been closed out when it reached its profit target. I plan to once again recommend this spread when and if it declines to short term support. The spread should continue to be valid until late May if history repeats. See BTI chart below. Await buy signals. See chart. Seasonals are ideally bullish but we are waiting for buy triggers.

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!”. Today, Friday 6 February, copper prices literally exploded. This confirms accumulation of longs by Commercials as well as my seasonal forecast.

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 suggests a $2000+ target once the current decline and cycle low are in place.

Silver triggered a short-term buy as did gold. Seasonal key date rally in silver continued. I advise waiting until the first few months of 2009 before taking on long term buy (investment) positions.

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.

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.

This overdue correction has 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 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 are initial indications of a short term low in PAL.

Currencies

Aussie $: I advised you clearly and well ahead of the fact that a MAJOR decline that was coming in the Aussie / Dollar. The market crashed against the US dollar. I also advised you that it was “not unreasonable to expect a short term low” in the Aussie. The hotline suggested a short term sell in the US dollar index which should have been closed out at a profit and another short sell should have been established as recommended via the hotline. See chart below. 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.

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 BTI short-term chart below, I advised you “the US dollar rally is not over yet” and that advice was correct. A seasonal low is due soon.

Japanese Yen: I have been bullish for many months and I REMAIN BULLISH. 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 against many currencies as predicted. There are sell signals in the Yen but and the anticipated bearish divergence that was expected to trigger has done so. I advised you to “watch for a short term top at any time now”. There is no change in my analysis. See seasonal chart below. 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, however, indications that resistance could stop the current rally. See chart below for the short-term BTI indications.

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.

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 short-term 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. My BTI indicator is now bullish on coffee.

Cocoa: the trend remains strongly bullish as we go to press. There is no indication at this time of a shortterm top. The intermediate and long-term 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. I remain short term bullish.

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. This 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.

Now that there are indications of a POSSIBLE short term low the key is to see if prices can follow through to the upside. See the chart below.

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. See my comments on pages 1 and 7 of this report. A bubble continues to develop. 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 increases daily. I advised you that there were “initial indications of bearish divergence”. The decline continues on a short-term basis. My indicators and trading systems are short.

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. This was very evident on Friday when the market ignored horrible unemployment data. There are numerous and fantastic opportunities developing across the board in many quality stocks. Wait for WEEKLY TIMING triggers for entry. Remember that market bottoms are a PROCESS and not an EVENT! By mid February we enter yet another important bullish time frame for stocks.

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 do not believe that these bull markets are over as yet and I suspect that a rally back to the $90 level is possible Seasonal factors suggest lower prices or a bottoming process until May. On the other hand, technicals are now 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 CTO report is nothing short of breathtaking.