Weekly Market Summary For Week Ending 5-25-07
By Al Martin
Individual trades for week of May 21-25, 2007-- In Tuesday’s trade, we went SS-2 HGN 3.40 C 3.39, L-4 SN 7.9650 S 7.99, SS-8 LBN 264.50 (ave), L-4 USM 109.18. In Wednesday’s trade, we were L-4 USM 109.18 S 109.18, SS-5 OJN 1.6160 C 1.6160, S-2 CTN 48.20, S-2 CTN 50.20 C 49.70, S-4 SPM 1535 C 1532.50, L-5 CCN 1934 S 1934, l-4 USM 109.04 S 109.08, SS-2 CTN 49.80 C 49.30, SS-5 CCN 1945 C 1935, SS-2 HGN 3.3210 C 3.3110, SS-2 HGN 3.32 C 3.31. In Thursday’s trade, we were SS-10 CCN 1966 (ave) C 1961, S-8 LBN 264.50 (ave) C 265.10, SS-2 HGN 3.33 C 3.32, L-8 USM 109.04 (ave) S 109.06, SS-5 SBN 8.87, SS-2 CTN 49.70 C 49.50, SS-5 SBN 8.97 C 8.92. In Friday’s trade, we went S-5 SBN 8.87, S-5 SBN 8.97, S-2 KCN 1.1275 C 1.1250, S-4 USM, 109.16 C 109.12, S-5 SBN 9.07, L-10 CCN 1924 (ave), SS-2 HGN 3.26 C 3.25, SS-2 HGN 3.24 C 3.23. Overview: Superb shorting action continued in the USM contract for the 4th week, as recently stronger domestic manufacturing data, combined with rising euro long rates, continued to spook Treasuries, despite softer domestic inflation data & a continued softening in Pac. rim & Asian consumption data, with locals now shorting on rallies to 109.16 & better. With near record, short interest in the contract, watch the coming week’s 2- & 5-year note auctions & late-week Chic. PMI & ISM (manuf.) data, as stronger auction demand and/or weaker manufacturing data would likely spark a short-covering rally. Good, range-bound scalping action persisted in the DSM contract, with rallies to 82.35 & better continuing to represent good shorting opportunities, with dips to 82.15 & lower good buying opportunities for standard 10-to-20-point scalps. Continue scalping the range, unless 82.50 or 82.00 are breached on a closing basis. Continued good, 2-way scalping action in the SIN, with the contract being held on dips into the 12.90/95 zone, and rallies being capped in the 13.10/15 zone, with trade preference to shorting rallies, as floor consensus shows belief that the 12.60's will be revisited. Superb, 2-way scalping action continued in the HGN contract, with locals buying dips below 3.24 & shorting in the 3.3150-3.3350 resistance zone, as the contract continues to move irregularly lower under the weight of bearish fundamentals, despite desperation buying from the funds. Continue to scalp the range, unless 3.36 is breached on a closing basis, as this would signal a potential move back to 3.40. Continued good, long-side scalping action in the SN contract, buying on 3-to-5-cent pullbacks & selling new highs, as the contract continues to be bid by the funds. Caution is advised, however, as, at 8.13 or better, the beans are overbought relative to near-term fundamentals. Good, 2-way scalping action continued in the CTN contract, as shorts got flushed by the ‘shill machine,’ i.e., good volume fund ‘fill or kill’ shill bids, combined with locals using odd-lot ‘Joe 6-Pack’ buy orders to squeeze shorts. However, cotton fundamentals remain bearish and with short interest now diminished, & funds & locals loaded up on the long side, the contract is prime for a reversal back to test 49.00. As such, we like shorting at current levels & above. Good, long-side scalping action persisted in the LBN contract, as typical seasonal strength continued to trump exceedingly bearish fundamentals & only a moderate short interest. Look to accumulate shorts just above 280 & better, in preparation for the normal $30. reversal, which invariably comes at the end of the seasonal strength, beginning after the first week of June, as we expect 240 to be revisited. Perfect bogus ‘shill rally’ in the SBN contract. However, short interest has now fallen precipitously, and fundamentals remain exceedingly bearish. Short at current levels in size!, as the trade is loaded up to the gills with longs. The bogus rally in the KCN contract continued for the 2nd week, with rallies being capped just below 1.14, and resistance showing at 1.1430-1.1470. However, the rally did show signs of weakening, as deep-pocket shorts showed a willingness to come in above 1.1250. Coffee fundamentals remained bearish despite the retail shill hype, and we expect 1.08 will be revisited, as the shill is unwound. The CCN contract continued to be a buy on dips, as the funds are still accumulating a long position, correctly noting that cocoa is one of the few softs with bullish fundamentals. Continue buying at current levels, as we expect 2,000 will be revisited, possibly this week. Superb shorting action in the OJN contract as the fund ‘shill bid’ at 1.6450 was smashed under the weight of increasingly bearish supply/demand data. We have been recommending scalping the short side of the juice for weeks, with 1.5480 being repeatedly held on the dip. Look for fresh rallies just above 1.60 for new shorting opportunities. Good shorting action in the CLN, with the contract being definitively turned back above 66.00, with support now pegged at 64.30. We continue to like shorting on rallies to 65.30 or better. As always, we welcome subscriber e-mails with your trading questions to virtualagency@yahoo.com