Weekly Market Summary For Week Ending August 3, 2007
By Al Martin
(8-7-07) Individual Trades (July 30-August 3. 2007):
In Monday’s trade, we went L-4 SPU 1457 S 1459.50, L-4 SPU 1459.75 S 1462.25, SS-4 SPU 1463.50 C 1461.
In Tuesday’s trade, we went L-4 USU 109.14 S 109.18, SS-4 SPU 1495 C 1488.75, L-5 SBV 10.29 S 10.35, SS-4 DW 6.26 C 6.2650.
In Wednesday’s trade, we went SS-4 SPU 1450.50 C 1448, SS-4 SPU 1455 C 1452.50, SS-2 HGU 3.5650 C 3.5550, L-5 SBV 10.15 S 10.25, SS-4 SPU 1460 C 1457.50.
In Thursday’s trade, we went L-4 CTZ 64.05 S 64.55.
In Friday’s trade, we went SS-2 KCU 1.1775 C 1.1760, SS-4 USU 110.13 C 110.13.
The USU contract continued to expand its range to the up side, late week, with the contract reaching a high of 111.00 in Friday’s intra-day trade, before falling back to a 111.20 close. We had, in our previous weekly summary, recommended scalping from the long side in this contract on dips to 109.24 or better, a strategy which proved to be successful throughout the week. However, with the contract now having entered a new higher trading range, we continue to like trading the contract from the long side, now on dips to 109.30 or lower.
We are still hesitant to short this contract up, as long as the fear bid remains in the bond market.
Also, the DXU contract, which had rallied early-week in line with our suggestions in last week’s market summary, an impending short-covering rally, in fact, did occur, with the DXU contract reaching a weekly intra-week high of 80.83 before falling back, late week, to establish an 80.06 close in Friday’s trade.
We had been consistently recommending shorting the DXU contract on rallies to 80.30 or better, looking for a short-covering rally. Indeed, that strategy has been consistently effective in that we have seen rallies to the 80.30 to 80.40 range in the DXU contract be quickly reversed.
We are looking for the next event in the DXU contract, which will be Tuesday Aug. 7's FOMC meeting. If the Fed does not move to a neutral bias, expect another short-covering rally in the DXU contract.
In the CLU contract, we have consistently recommending selling the contract short on rallies, after the mid-week failure, to a new high at 78.77, and the key reversal established in Tuesday’s trade, which we had been suggesting would occur. We continue to short the contract all the way down and will continue to short the contract down to the 75.50 area. Indeed, the contract went out Friday at 75.48. We expect this contract will break the 73.50 support level and establish a close under 73.00 in the coming week’s trade.
The GCZ contract continued to rally, late week. However, we look at the gold as being nothing more than a shorting opportunity on rallies, as we mentioned in the previous week’s summary, consistently recommending shorting the contract on rallies into the 684 to 686 area, a strategy which has been a consistently winning trade over the last 3 weeks.
We also had suggested in the SBV contract that the ‘shill’ in sugar was not over. And we continue to recommend scalping the sugar from the long side on pullbacks to the 10.00 area. Indeed, in last week’s trade, we saw a marginal new high at 10.56 established, from which we quickly pulled back in Friday’s end-of-week trade’s close at 10.25. We expect that this contract will come down to test the 9.90-10.00 area before attempting another bounce.
In the LBU contract, we continue to like shorting the lumber on rallies into the 283-287 area. We think the 287 near-term top is going to hold, and we would expect the lumber to fall below 270 in the coming week’s trade.
In the OJU contract, we also had been recommending short-selling the contract at 1.40 or better, looking for penny scalps. Indeed, the contract continues to be turned back from the 1.42 area, although consistently supported at 1.39, despite the intra-day selling pressure seen in Friday’s trade. We continue to look for the Sep. OJ to fall back to the 1.30 level, in that fundamentals are not sufficiently bullish to support current prices.
In the SIU contract, we continue to like trading the contract from the long side on dips to 12.97 or lower. We have seen that the contract has been able to consistently penetrate resistance in the 13.13/14 area to attempt to trade up to next resistance at 13.23/24. We continue to like trading silver in the narrow zone, i.e., scalping from the long side on dips just below 13.00 and scalping from the short side at 13.20 or better.
The copper fell back, late week, as we had been suggesting it would in our previous week’s summary, with a 3.4790 close being established in the HGU contract at the end of Friday’s regular session. We continue to expect that the copper will test the 3.40 level in the coming week’s trade. For signs, look for a close below 3.4375, i.e., July’s lows, to establish a new leg down in the copper.
Coffee rallied, late week, although no fresh fundamentals in the coffee, and, indeed, supply/demand equation remains net bearish in the coffee. Coffee does look like it wants to move higher in here for a new bullish shill effort. We therefore would expect a runup to the 1[?].1950 area in early-week trade, an area which we would look to be shorting the coffee from once again.
The CCU contract continued to back off, as we had suggested in the previous week’s summary. We have been consistently shorting the Sep. cocoa, as fund liquidation continues to persist, and we feel that it is not safe to scalp the cocoa from the long side until we establish a test of the 1850 level.
In the CTZ contract, we continue to scalp from the long side on pullbacks into the 63.50-64.00 area, establishing reverse short-scalps on rallies to 64.75 or better.
We continue to look at the cotton as a trading range unless 65.00 can be reestablished on a closing basis.