Fiscal Cliff Trade Continues to Generate Profits
Written by Al Martin Sunday, 30 December 2012 21:38
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(12-30-12) In Friday's action the March Long Bond contract continued to move higher as fiscal cliff worries drew nearer. We were sellers of the Bonds, which we had been carrying since 146.24 earlier in the week on our standing order at 148.24. We had warned in our last week’s missive to continue to stay long the Treasury Bonds. We still think the Bonds are a long trade on dips, depending on resolution of the fiscal cliff matter.
The Feb. Crude Oil contract continues to hold the bulk of its gains. Although we were short sellers of the contract above $91in late week trade, covering on 25-50 cent dips, Oil continues to baffle traders, as it remains dynamically overbought relative to underlying supply/ demand fundamentals. We will, however, continue to short the Oil on moves to 91.25 or higher.
The Feb. Gold contract continued to move sideways with consistent turn-backs in the 1665 area, as fiscal cliff longs began to come out of the Gold. Depending on resolution of fiscal cliff, Gold has much lower to go, should a stop-gap measure come to pass.
March Sugar contract – we were buyers of the contract on the move above 19.30 in Friday's session, taking out another 20 cents out of the contract, which remains overvalued at current levels. Although we are now seeing lower highs and lower lows, the contract remains dramatically overvalued, given current global Sugar glut. We will continue to sell this contract on moves to 19.50 or better.
The March Orange Juice contract – we were hit on our 1.2995 sell stop in Friday's trade, creating a short position which we covered M.O.C. at 1.2670. We had warned of overvaluation in the March Juice contract. We think the contract has lower to go.
The March Lumber contract which we sold in Thursday’s trade on our standing orders at 393, we covered Friday, taking nearly $10 out of the contract, as Lumber moved limit down. Lumber is now at an area where it has been turned back repeatedly. We would expect the 390 highs to hold.
Grains continued to weaken. We continue to trade all of the March contracts – Beans, Corn and Wheat – from the short side, as global inventories continue to build and global demand continues to fall. March Beans have come down for a test of 14.00 on several occasions. We think the next test down will break the 14.00 barrier and will take the Beans down to the 13.80 level. We also believe that the Wheat has further to go, down to the 7.60 area and the Corn in our opinion being worth no more than 6.70 in current market conditions.
March Silver contract continues to offer up superb shorting opportunities on moves above 30.25. In late week trade we were consistent sellers on our standing orders at 30.25, covering on 25-50 cent pullbacks. We think Silver will not be able to hold $30 and has lower to go.
The March Platinum contract -- we were short throughout the week. We covered at the 1521 close in Friday's session. We think this contract is coming back down for a test of 1500.
The March Copper contract, which we had been consistently shorting on moves to 3.61 or higher throughout the week, covering on 1-2 cent dips. We would look to continue to sell the Copper contract on moves above 3.60.
March Coffee -- we continue to trade the Coffee on the short side. We had been consistently selling the contract above 1.47 and continue to look at 1.47 or better as a shorting opportunity as global Coffee inventories also continue to swell.
March Cocoa – we had warned that the March Cocoa had lower to go. We are now seeing annual lows put in the contract. We think this contract comes down for a test of 2200 in the coming week’s trade.
March Cotton – we had warned of severe overvaluation of the March Cotton contract. We were short at 77.06. Finally late week we begin to see breaks in the Cotton as longs came out. We expect that the pullback in Cotton is not finished and will continue down to the 72 cent area.
Unresolved Fiscal Cliff Issue Ensures Volatility Shall Remain
Written by Al Martin Monday, 24 December 2012 20:21
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(12-24-12) Last week we continued to trade the March Long Bond contract from the long side, consistently buying on dips down to the 146.12-22 area, selling mostly on half-point rallies. The Bonds had a good showing Friday with last week's 7-year Bond auction, having gone off better than expected. We expect the Bonds to continue to be a buy on dip trade as safe haven play continues to come into the market between now and the end of the year with no resolution of fiscal cliff issues in sight.
The February Oil contract continues to be supported despite the fact that the contract is at least $10 overvalued relative to the rest of the CRB index. We were consistently shorting the contract on moves to 90.00 or better late week, covering on 50 cent - $1 dips. We will continue to short the Oil now on moves back above 89.00.
Feb. Gold contract continues to move into lower lows with now both the 200 and 440 day moving averages being breached. The next spot down in the Feb. Gold contract would be the support level at 1632. We think liquidation in the Gold will continue as yearend approaches.
The March Sugar contract also continues to make a series of lower lows and lower highs. We were short the contract again from 19.23 in late week trade, covering on the dip down to 18.83. The short covering we saw in Friday's action we think was nothing more than that and we believe the contract should be shorted again as the ongoing global Sugar glut reaches record proportions.
The Jan. Orange Juice – we were short sellers on the failure to move higher off the 1.40 break. Recent freeze damage over the weekend in north Florida belt may create some excitement in the Juice. However we continue to think the Juice is a short at current levels.
Jan. Lumber contract continues to push higher. We were sellers again on the 366.60 close in Friday's session, as we had been consistently shorting limit moves up, covering on $5 dips the next day. We would be looking to do the same in the Jan. Lumber as the contract is severely overbought at current levels.
Grains continue to move lower as the global Soybeans inventories continue to swell and demand continues to falter. With this week's cancelation of large US bids in China for Soybeans, we think the contract, which has come down for a test of $14, still has further south to go. We also expect that the March Corn will trade back under $7. We were short the Corn as soon as it broke 7.20 late week Although we have now covered our shorts down in the 6.96 area, we expect the Corn has lower to go. Wheat -- having now broken 8.00 as we promised you it would in last week’s missive. We think that the Wheat can move down to the 7.70 area as global inventories continue to build and Russia now reenters the market as a Wheat exporter.
March Silver contract continues to be overbought relative to action in the Gold. We had told you in last week's missive that the Silver would break $30. Indeed we saw several efforts late week where the Silver traded down into the 29.60’s. We expect the Silver’s coming back down for a test of 29.50 in the coming week’s trade.
We had also warned last week of a break back below 1600 in the Jan. Platinum. We have shorted the Jan. Platinum all the way down throughout the week, taking an aggregate $50 out of the contract and we still believe the Platinum has lower to go, as South African production is being rebuilt and the Russians continue to come to market with fresh supplies.
March Coffee contract – we had warned of continuing lower prices in this week's session. We have consistently seen the 1.42 area tested. We have been consistently shorting the Coffee on moves now above 1.46. We sold the Coffee on the 1.4620 close in Friday’s session as we believe that the 1.40 area will breached as global Coffee inventories continue to swell.
We had also warned in our previous week's missive of continued downward action in the March Cocoa with our belief that the 2300 would be reached. Indeed we had traded down into the 2310 area in late week trade. We think a solid test of 2300 is coming and the Cocoa will trade down into the 2275 area.
March Cotton continues to be supported in the 76-77 cent area, but is unable to make further upside progress. We have been consistently shorting the contract now at 76.50, covering on half penny dips. Global Cotton inventories also continue to build as demand falters. We still believe the Cotton has lower to go.
The March Copper contract – we had warned in last week’s missive that the 3.60 level would be breached in this week's trade. Indeed you saw the Copper trade all the way down to 3.52, once the breach occurred 3.5595 sell stops were hit, giving up a 7 cent profit during the week. Global Copper glut now moving to record proportions as industrial demand continues to falter, particularly in China and India would suggest we still have lower to go in the Copper.
Expect Markets to Move Lower with No Fiscal Cliff Deal before Congressional X-Mas Break
Written by Al Martin Monday, 17 December 2012 00:59
(12-16-12) We have been continuously trading the March Long Bond contract from the long side throughout the week. We finally saw the Bonds pick up in Friday’s trade. We had been consistently buying the Bonds on dips down to 147.22, selling them on ¼ - ½ point lifts. On Friday we held the Bonds up to 48.18 before selling them. We were buyers of the Bonds once again late and 148.11, as we expect 149.00 to be reached in the coming week’s trade, as we are expecting the SBX to come down another 15 handles, coming into the congressional Christmas break with no fiscal cliff deal yet in sight.
"Better Than Expected" Friday Unemployment Numbers Create Fresh Shorting Opportunities
Written by Al Martin Monday, 10 December 2012 04:33
(12-9-12) Friday's "better than expected" unemployment numbers, which in fact were not, created new opportunities. We sold the spoos on our standing orders at 1420, covering them at 1413 late in the session. Also our standing orders buying the March Bonds at 149.12 were also filled, which we sold at 149.20 on the close. We would note that the Bureau of Labor Statistics stated that there was no "Hurricane Sandy" distortions in these numbers as had been expected. Therefore the numbers should be compared to the original estimate of 185,000. This combined with the 50,000 downward revision to prior data and an unchanged work week subcomponent would suggest that the numbers were actually weaker than expected on an apples to apples comparison, shills' efforts to doubt the numbers notwithstanding.
Absurd 'Risk on Trade' Persists… But For How Long?
Written by Al Martin Monday, 03 December 2012 03:32
(12-2-12) We continue to see the Dec. Long Bond advance in late week trade. We were buyers again consistently on pullbacks to the 150.28 area in both Thursday and Fridays trade, taking a 1/4 to 1/2 point scalp out of the contract with a close of 151.13 in Friday’s session. We think it likely that the contract will come up to test 151.20 in Sunday night’s trade.
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