Coming Summer Market Action Presents New Opportunities

Written by Al Martin Sunday, 05 June 2011 19:50

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Coming Summer Market Action Presents New Opportunities

 (6-5-11)This week’s market recommendations are based on Al Martin’s interview with Erskine on Erskine Overnight Radio show (www.erskineonradio.com) from June 4, 2011.

Here are Al’s summer market picks:

As we mentioned last week, the summer swoon in equity prices has begun and other markets are acting accordingly. We are continuing to trade the June S&P contract from the short side. We were short at 1316.50 Thursday, covering at 1296.50 in Friday’s after-market trade. We believe that although the 1295 area has been twice held late last week, this area will give way and we will see a test of the 1275 level within the next two weeks.

 Also we continue to trade the September US Treasury Long Bonds contract  from the long side. We were buyers of the contract Thursday night at 124.28. We sold the contract at 125.20 in Friday morning trade, where the Bonds got a lift off the poor employment numbers. We continue to like trading the Treasury Bonds from the long side and believe that yields have lower to go as market attention is now being refocused on global deflation.

The June Dollar contract has been hit for the same reason the Bonds have rallied, based on a concept of the Fed is being forced into a QE3 program due to deteriorating economic fundamentals both domestically and globally.

 (The Fed will be forced to launch the Good Ship QE3. Cunard didn’t make a QE3, but the Fed will)) We believe that the Dollar contract has now fallen to a point where it can be bought at 73.70 for a 50-point lift.

The July Oil contract – we continue to trade from the short side. As we mentioned last week, we had been consistently selling the contract on rally efforts above 101.50 and we will continue to do so. The Oil should be $5 lower by now but is being supported by increasing Middle East tensions. However supply/ demand fundamentals of Oil continue to deteriorate. We continue to prefer trading Oil from the short side on rallies.

June Gold contract – we continue to trade both ways. We would note that last week’s rally efforts are no longer being supported by inflation, but now being supported by near-term dollar weakness. Also the re-emergence of a so-called “fear bid” in Gold is becoming more noticeable as equity prices come under more pressure. We like trading the Gold from the long side on dips down to $1530 and from the short side on rallies to $1560.

 The July Sugar contract -- our favorite short trade on the board touched 24.00 cents  in Thursday’s trade. Sugar is being supported by near-term export delays out of Brazilian ports. However that belies a record Brazilian Sugar crop along with record Indian, Russian and Southeast Asian Sugar crops. Sugar also has much lower to go.

July Orange Juice contract – we are recommending short positions be re-established on lifts above 1.85 cents. Indeed last week we sold the Sugar in Thursday’s rally up to 1.8630. Juice broke sharply in Friday’s trade. We are still looking for lower prices in the Juice.

 The July Lumber contract -- we had recommended shorting again on moves up to the 233-240 area. Indeed we saw the July Lumber contract move back into the 240 area, representing prime shorting opportunities. We were short the Lumber from an average of 237 midweek, covering at 227 on Friday’s close. We believe the Lumber will trade under 220.

 Grains continue to be a mixed bag. However July Soybeans are now significantly overbought, once again back above $14. We would note that the July Soybeans have consistently run out of steam in the 14.30 area. We are now trading the Beans from the short side and would look to be sellers on any failed rallies to 14.20.

 July Silver has reached a small troughing area in the 35.00-38.00 area. However we believe that the Silver range will be resolved to the downside with short covering rallies as we believe 35.00 will give way in the coming week’s trade.

 In the White Metals – they continue to be overbought with Platinum back above $1800. We have been consistent sellers of the Platinum at 1830 and would look at the 1830 level for fresh shorting opportunities, covering on $20 dips.

 The Sep. Palladium contract is now approaching $800 again. However we are not prepared to reinstitute shorts until the contract gets back over 800.

 The July Copper contract – we have been consistently trading the contract on the short side on rallies. Copper has been continually overbought due to Goldman Sachs’ buying recommendations, despite the fact that Goldman Sachs is short. For those wiling to hold onto the contract, we think the current area 4.14 for the July contract will give way for a retest of 4.00 in the next two weeks

 The July Cocoa contract was finally coming down under the reality of a record global Cocoa crop coming in the new crop season, which starts harvest later this month. We are trading the Cocoa from the short side as we were consistent sellers at 3000. We are now selling the contract on rallies back to2930.

 The July Coffee contract – sharp short-covering action in Friday’s session, making the Coffee a prime short back above 2.70. We have made a small fortune trading the Coffee in the last 10 sessions. We expect the Coffee will come down to retest this week’s 2.5130 lows in the coming week’s trade.

 The July Cotton – despite record increase in planting acreage, it continues to be bid on ideas of recent US weather affecting crops. Nonetheless crop size will be enormous. We like shorting the Cotton above 1.62.

 The July Corn contract continues to be overbought, being also supported by US weather conditions. However as USDA has reiterated, even some anticipated crop loss in new crop Corn isn’t going to change the fact that the United States will have a record crop. Indeed we like shorting the Corn on rallies to 7.60 or better.

 The July Wheat fell back sharply last week, as we had recommended selling when it came under $8 with new Russian selling in the market of 10 million tons and more to come. We like selling Wheat now on rallies to 7.86 or better.

 The August Live Cattle contract – we continue to trade from the short side. We had been short continuously since 1.15 and have only recently begun to cover on dips to 1.0340. We would look to establish fresh short positions in this contract on any rallies back to 1.07.