Commodity Bubble Still in a Slow Bleed
Written by Al Martin Sunday, 17 October 2010 21:37
(10-17-10) Once again we saw the late week pattern of sell-offs in the Treasury Bonds continue with the December Long Bonds closing down about 36 ticks in Friday's trade. We were buyers of the Long Bonds at the close, as we have been every Friday on sell-offs at 131.00. With no fresh calendar next week and reduced supplies, we would once again expect the Treasuries to rally early week, as they have done in each of the last 7 weeks.
The December Dollar contract continues to be hit with intermittent short-covering rallies every 2 or 3 days of 50-100 basis points. We would expect this pattern to continue as the Dollar short trade becomes increasingly crowded. However we continue to believe that a more substantial short covering rally is in the offing. (QE II hasn't failed yet.)
Momentum Buying Rules the Day!
Written by Al Martin Sunday, 10 October 2010 21:37
(10-10-10) SPECIAL NOTE: The commodity complexes are now forming a second speculative bubble, thanks largely to the perception of Fed action and incessant ETF buying by the Unwashed. Indeed all commodities now are as far above their underlying supply/ demand fundamentals as they were in the 1st quarter of 2008. Therefore short sellers beware. However, we are short sellers and we will continue to short on rallies as we feel that this bubble, like all bubbles being driven by the Unwashed, are subject to breaks. Since Joe Six Pack is the primary propellant of prices we will consistently see intra-day breaks.
Late week we did not see the typical sell-off in the December Long Bond contract, which has been visited upon us in the last 4 weeks. This was due principally to the Friday unemployment number and also increasing demand for US Treasury instruments along all spectrums of the curve. We expect the Long Bonds will rally Sunday night. We would look to buy them on any dip back to 134.04.
The December Dollar contract continues its decline with intermittent short covering rallies, reaching a fresh cycle low at 77.57 in Friday's session. We would expect, however, another mini-short-covering-led rally effort in Monday's session.
Commodity Bubble Continues To Wear Around the Edges
Written by Al Martin Sunday, 03 October 2010 21:21
(10-3-10) We saw December Long Bonds pull back late Thursday and early Friday. Once again we were buyers of the Treasury Long Bonds under 133, taking a half of a point out of them in Friday's trade. We continue to trade the December Long Bond contract from the long side. We feel their recent weakness will be reversed in the coming week's trade.
The December Dollar contract continues to plummet, as all countries race to the bottom, attempting an effort to depreciate their currencies. However the Dollar is sharply oversold now on a technical basis. The Euro is now above the 1.36 previous high. We think a short covering bounce is near for the Dollar. As a consequence we will be looking to short the Dec. Euro contract on any rally above 138 on Sunday night.
December Gold has reached our $1320 target late Friday. This will likely bring in fresh Unwashed buying Sunday night and in the session Monday, perhaps taking the Gold up another 5 or 6 dollars -- where Smart Money short-sellers are waiting.
Gold continues to be largely driven by 1 and 2 lot Joe Six Pack buying, combined with short covering, but $1320 is a widely recognized upside target by many firms. If we get some sort of a lift in the Dollar or a short covering bounce in the Dollar, this Gold is going to go south in a hurry. The bounce would come because the Dollar is so oversold on a technical basis that it is due for some sort of technical bounce.
Coincidentally we now have the Euro trading above the 1.36 top. The Euro is trading so far beyond economic fundamentals in the Eurozone that the setup for a technical short-covering led bounce in the Dollar, a sell-off in the Euro, and a sell-off in the Gold is there. There is the right kind of setup for that trade now.
Commodity Bubbles Grow Shaky -- But Not Popping Yet…
Written by Al Martin Sunday, 26 September 2010 22:24
(9-26-10) Late week we saw the Long Bonds come down as equity prices continue to rally and would-be inflation hawks continue to sound the bell. However we feel, as we have consistently felt for the last month, that these end of week sell-offs that we are seeing every 2 weeks are buying opportunities, and indeed they have proved to be so in recent months.
We continue to feel this is the case despite fresh Treasury supply next week. We believe the coming economic calendars will be increasingly friendly to Bonds, as we are seeing now manufacturing and industrial production numbers declining. We continue to like trading Bonds on the long side. Indeed we bought the December Treasury Bonds at 131.23 in Friday's close.
'Bubblicious' Commodity Markets: Yes, But Plenty of Pins Are 'Waiting'…
Written by Al Martin Sunday, 19 September 2010 19:55
(9-19-10) We continue to trade the December Long Bond contract on the long side. Indeed we were buyers of the contract Thursday night at 129.16. We were sellers of the very same contracts at 130.16 in Friday's session, taking a full point out of the contract. Despite new Treasury supply coming next week and speculation over Fed QE2 purchases, we still like trading the Bonds from the long side.
The Dec. Dollar contract has begun to show support in the 8100 area. Whether or not the Dollar lifts this week is going to largely depend on what the Fed has to say about Quantitative Easing in its Tuesday meeting.
The October Crude Oil contract -- we have consistently recommended trading it from the short side on rallies. Indeed we continue to do so. We were sellers Friday morning on our 74.49 sell stops, which were filled at 74.47, covering at 73.47 in late session, taking a full dollar out of the contract on the very low print of the session. We continue to look at the Oil as a shorting opportunity.
The Dec. Gold contract, we feel, is overbought now above $1280. Fresh buying did come in, however, sellers showing at 1285 and higher. We now like selling the Gold at current levels, as we feel it is too soon to make a run to $1300.
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