Market Volatility Increases as Speculative Bubbles Begin to Bleed Air

Written by Al Martin Sunday, 25 October 2009 21:23

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(10-25-09) Last week we saw the Dec. Long Bond contract finally weaken in Thursday and Friday trade, still presenting good buying opportunities on dips. The Bonds have held up remarkably well, but with fresh supply coming this week, it is likely that the Bonds will be further pressured. The next place we will be looking to buy the Dec Long Bond contract will be at 118.24 in Sunday night’s trade.

The Dec. Dollar contract which rallied late week -- we would expect this to continue to test the 76.30 area. We had warned that a short-covering rally in the Dollar was at hand and we think this will play out with potentially another 100 points on the upside.

The Dec. Crude Oil contract which we shorted consistently above $81in Fridays trade, covering on dollar dips, fell to a 79.64 close Friday. Once again the Oil is severely overbought and looks tired above $80.

The trade sentiment in the Dec. Gold contract continues to be exceptionally bearish. Gold was a sell-on-rally trade all week. We were consistent sellers late week above 1060 and will continue to look at the 1060 area for short–selling opportunities, covering on $5-10 dips.

The Silver continues to act weak, relative to the Gold and other metals. We were consistent short sellers of the Dec. Silver contract at 17.75 up to 17.90 in Thursday overnight session. We see that the Silver closed once again under 17.70, so continue ot short rallies above 17.80.

The Dec. Copper contract which finally did break out above $3 was able to hold a $3.02 close Friday. However we think this contract will come back under $3 in the coming week’s trade.

The March Sugar contract – we were short sellers Thursday night at 23.35, covering down on to the test of 2300 Friday. Although 23 cents held, we think that the Sugar has got lower to go

The Jan. Orange Juice contract which we had been warning that it has become severly overbought – we shorted in Thursday morning action at 119. 65, covering on Froday’s close taking out 5 cents or $750 per contract traded. We think the Juice has got further to fall.

The Jan. Lumber contract which remained unchanged at 194 in Friday’s trade, due to  exceptionally light volume, we still feel will fall back to test the 183 area.

The Grain complex strengthened midweek to come under renewed selling pressure Friday as Grain fundamentals turned more bearish with the release of the new China Wheat estimates. We continue to short the Nov. Beans on rallies. We had shorted the Beans Thursday night at 1022 and would look to any rallies to 1015 or better as shorting opportunities.

The Feb. Pork Bellies rallied Friday back to that 86 cent level, a level we would be looking at as a fresh shorting opportunity

We had been warning of overvaluation in the Dec. Coffee contract. Indeed in Friday’s trade, the Coffee broke hard, filling our 1.3995 sell-stops which were filled at 1.3975. We took 3 cents out of the contract on the close. The Coffee fundamentals are growing more bearish. We would expect more downside action in the Coffee tp test the 1.3550 level in Monday’s trade.

The Dec. Cocoa broke out above 3400 in Friday’s session WE were short sellers at 3403, taking $40 out of the contract at the close. The Cocoa remains dangerously overbought at current levels.

The Dec. Cotton contact which we have been telling you to be consistent short sellers of above 68.50 cents indeed fell back in late Friday’s trade. Our sell-stop of 67.99 filled and we took a half a penny of out of the contract. The Cotton shill looks tired.

Rotating Speculative Bubbles in Commodities Create New Trading Opportunities

Written by Al Martin Sunday, 18 October 2009 22:55

(10-18-09) Early Friday morning, we issued a flash market recommendation to buy the December Long Bond contract at 118.28. We subsequently sold the contract at 119.16 later in the session, netting a $1250 profit per contract traded. As subscribers are aware we are consistently trading the bonds on the long side on dips and will continue to do so.

The Dec. Dollar contract picked up late week in line with our previous expectations. We think another short covering rally in the Dollar is coming and that the contract will trade back to 77.50 in the coming week's trade.

Read more: Rotating Speculative Bubbles in Commodities Create New Trading Opportunities

Last Week’s Commodity Fund Switching Creates This Week’s Opportunities

Written by Al Martin Sunday, 11 October 2009 19:57

(10-11-09) In Friday’s session we saw the Dec. Long Bond contract resume its Friday pattern of declines on the back of a mediocre 30-Year Bond auction on Thursday. However, the 3 and 10-Year auctions were rated as “excellent.” We were buyers of the Dec. Long Bond contract at 119.28 in late Friday trade. We think that you want to be trading the contract from the long side starting Sunday night.

     The Dollar contract, which we had warned that a rally was coming, indeed began to pick up steam late week. We now see many warning signs in the market that a short squeeze is coming. Remember we have a record percentage of contracts sold short in the Dollar Index, and we think that a sizable short squeeze is now in the making in the Dollar. Continue to buy on dips.

   The E-Minis, despite all belief to the contrary were able to rally Friday, when in fact the professionals were looking for a softer market. This sets up for a prime shorting opportunity in Monday’s trade. Should the SPX cash move up to test 1075, we would look to put on a fresh intra-day short position.

Read more: Last Week’s Commodity Fund Switching Creates This Week’s Opportunities

End of Quarter Portfolio & Fund Adjustments Create Choice Trading Opportunities

Written by Al Martin Sunday, 04 October 2009 21:46

(10-4-09) Last week we took advantage of the typical end of 3^rd Quarter volatility that was created when commodity funds come in to buy commodities that they have the largest positions in and will sell commodities that they own the least of  -- in order to finance their purchases.

Consequently we were initially long the Gold and the Copper, knowing that the funds already loaded up with Gold and Copper, would push it higher -- which is exactly what happened midweek. Then we made a short-sellers’ tasty and always profitable “Reverse End of Quarter Trade,” wherein we went short the Gold, the Copper, the Sugar, and the Beans in Wednesday night trade. Indeed you see that the Sugar fell back and was a very tasty short trade in both Thursday’s and Friday’s trade. We see that the Beans got hit hard Friday in line with our Thursday night prediction, as the counter-reaction to end of quarter portfolio commodity fund adjustment played out. This is a phenomenon that professional traders have long recognized and will attempt to take advantage of at the end of every quarter.

Read more: End of Quarter Portfolio & Fund Adjustments Create Choice Trading Opportunities