Market Forecast & Trading Recommendations
By Al Martin
[2-18-08] Individual Trades for week of February 11-15-2008
In Monday’s trade, we went SS-2 CLH 92.50 C 92.25, SS-4 SPH 1333 C 1330.50, SS-4 SPH 1338.25 C 13.35.25.
In Tuesday’s trade, we went L-4 USH 119.06 S 119.10, L-4 USH 118.09 S 118.13, L-4 USH 118.12 S 118.16, L-4 USH 118.11 S 118.15.
In Wednesday’s trade, we were L-12 USH 118.15 S 118.17. SS-4 SPH 1365 C 1362.50.
In Thursday’s trade, we went SS-2 HGH 3.55 C 3.52, L-4 USH 117.02 S 117.06, L-4 USH 117.00 S 117.04.
In Friday’s trade, we went L-4 USH 117.02 S 117.06.
Our near-term forecast for equities remains bearish. We believe last week’s series of light-volume rallies represent a good shorting opportunity, in that with no fresh features in the market, sellers began to build. And indeed with fresh negative news now coming in from the bond markets every week we believe that the 1313 support in the SPX will be tested in the coming week’s trade. We further believe that the intermediate support on the previous intra-day low session at 12 59 in the SPX contract will be unable to hold.
The SPH contract proved to be a consistent sell on rallies to 1355 or better. Indeed we sold the contract again in Friday’s session at 1350. Last week’s series of light-volume rallies continue to represent a great short opportunity in the SPH contract.
The USH contract fell sharply late-week, something that we have seen three times before since September 28th and each one of these explicable declines has proved to be a buying opportunity that was no different, with the contract falling to a intra-day low of 155.28 in Thursday’s session, rallying to a Friday high of 117.08. We continue to like scalping this contract from the long side on dips to the 116.20 area.
The DXH contract finally backed off late-week, as we had been consistently warning. The contract was overbought and has recommended shorting the contract on rallies above 76.50, with the contract falling back to an intra-session low of 76.00 in Friday’s session. We continue to like shorting the contract on rallies to 76.50.
Oil surged past its previous $93.00 most recent high in the CLH contract, to close at $95.50 in Friday’s session. Oil is severely stretched and we like selling the oil at current levels or higher.
The SBH contract, under consistent fund buying, rallied once again late-week to retest its recent 13.50 area high. Sugar remains very overbought relative to underlying fundamentals. And we continue to stay with our recommendation to short the sugar on rallies to 13.25 or better.
The OJK contract, which we have been recommending shorting, indeed fell back sharply in last week’s trade, finishing out the week at 1.25, coming in some $.07 on the week. Look for a near-term bounce in the contract. But we continue to like selling on rallies to 1.27 or better.
The LBK contract mounted several rally efforts intra-week, closing out the week at 243. Look to short this contract on rallies back to 246 or better.
The SIH contract mounted several late-week rally efforts, being consistently turned back in our favorite shorting zone, in the 17.50 area. Continue to look for rallies into the 17.50 area for fresh shorting opportunities.
The HGH contract continued to trade weakly, finishing out Friday’s session around the 3.52 area, after establishing an intra-week pullback low at 3.47. We expect the copper to fall back to test the 3.37 recent breakout range.
The KCH contract which we have consistently recommended shorting on rallies above 1.50 indeed pulled back sharply in late Friday session, as locals came in to liquidate long positions, dropping the contract nearly $.031/2. Coffee is severely overbought relative to fundamentals. Continue to look to short the contract on rallies above 1.50.
The CCH contract, undoubtedly the most overbought contract relative to underlying supply/demand fundamentals on the board, finished out the week at 2526, nearly $300 above current cash quotes. We like shorting the contract at current levels.
The CTH contract finally fell back after a limit-bid session in Thursday’s trade to close out the week at 68.85. As we have consistently recommended, the cotton continues to be a short sell on rallies to 70.00 or better.