Weekly Market Summary For Week Ending 10-5-07
By Al Martin
(10-8-07) Individual trades for week of Oct 1-5, 2007:
In Tuesday’s trade, we went L-4 USZ 111.19 S 111.23, S-4 LBX 244.30 C 242.80, S-4 SPZ 1557 C 1554.50, S-15 CCZ 1950 C 1950, S-4 LBX 242.50 C 241.
In Wednesday’s trade, we went L-4 USZ 111.30 S 112.02, L-5 CCZ 1882 S 1892, S-4 CLX 80.01 C 79.76.
In Thursday’s trade, we went L-8 USZ 111.24 (ave) S 111.26, S-5 OJX 1.3630 C 1.3560.
The USU contracts continued their buy-on-dip trade Monday through Thursday, buying on dips to 110¾ or less, selling on rallies to 112 or better. Friday’s sharp 42-tick decline in the contract, due largely to the release of September unemployment report, is, in our opinion, overdone and, basis Friday’s close at 110.25, represents a great long-side scalping opportunity, as we expect the contract will mount a short-covering bounce back to Friday’s intra-day recovery high at 111.19.
The DXZ contract continued to be a sell-on-rallies trade, as we have been recommending consistently selling the contract on rallies to 78.50 or better, covering on 10-to-30-point dips, wherein trades were available on the short side in each day last week. Until the contract can establish a recovery close above 78.60, we continue to believe that the DXZ contract is a sell-on-rallies trade.
The GCZ contract continued to increase its intra-day volatility, most noticeable in Thursday and Friday’s session, wherein the contract had a $15 intra-day range in both sessions. The contract continues to remain a sell on rallies into the 745 or better area, covering on 5-to-10-dollar dips.
The SBH contract, which we had recommended selling at 10.15 or better in last week’s Market Summary, indeed reached a post-recovery weekly high at 10.18, affording excellent shorting opportunities. With Friday’s close at 9.79, we feel the contract is still rich and would look to re-short the contract on rallies back to 9.90 or better.
The OJX contract continued its rally, with good shorting opportunities on two-penny, or better, intra-day gains, covering on penny dips, with no fresh fundamentals in the juice contract other than some weather-related stress affecting the north Florida orange trees.
The funds have gotten a hold of the juice again and have been bidding it up, but, once again, the juice at Friday’s close, basis 1.3715, remains at least 20 cents overbought relative to its underlying supply/demand equation. We continue to like shorting the contract on two-penny rallies, or better.
The LBX contract, which we had recommended shorting in the 246 area, in our last week’s Market Summary, in fact dipped back to test the 240 area, which was marginally held with a sharp short-covering rally on Friday back to 249, representing a renewed shorting opportunity. Continue to short this contract at current levels, covering on $4-5 dips.
The SX contract fell back, late week, after failing at its recent highs above $10, the contract now coming back closer in line with fundamentals. We would, however, look for a likely rally back to test the 980 area, an area that we feel should be shorted.
The PBG contract, which we had been trading from the short side, finally showed some new strength, late week, with the contract exiting the week at 87.43. We would, however, continue to look to short the contract again on rallies back to 89.50 or better.
As the SIZ contract continued to see resistance above 13.50, in line with our last week’s recommendation, we continue to like selling the contract on rallies to 13.55 or better.
The HGZ contract found continuing strength, late week, on perceived Peruvian strike threats. However, its supply/demand equation continues to deteriorate, and we currently like shorting the contract on rallies to 3.75 or better.
The KCZ contract, which held its 1.3240 weekly low, rallied back in Friday’s trade to establish a 1.37 close. We continue to like shorting this contract at current levels, up to the 1.3990 area, looking to cover on two-penny dips, as supply/demand fundamentals remain bearish.
As we had been predicting, the CCZ contract finally broke in this week’s trade, coming down $213 off the weekly top, to establish a low at 1852 with good counter-rallies back to the 1900 area, and the contract exiting the week at 1858. We feel this contract is now actually cheap relative to current cash fundamentals and like scalping it on the long side at current levels.
The CTZ contract, once again, continued the weak trading pattern that it had established in last week’s trade on the failure at the 67.30 area, coming down to establish a weekly low at 62.10. We now like shorting the CTZ contract on rallies back to the 64.50 area.
The CZ contract also fell back, late last week, as its supply/demand curve continued to grow more bearish, and we currently like shorting the contract on rallies back to 3.50 or better.
The WZ contract also fell back, late week, as wheat suddenly came out of the proverbial woodwork, establishing a close at 8.90 in Friday’s session. However, wheat has not traded within the last 14 days below 8.72. Continued caution is urged in shorting the wheat, and we would not want to do so until we see a rally back to the 9.20 area.
The LCZ contract fell back, late week, after repeatedly being turned back on rallies to the 1.00 level. We like shorting the contract on rallies to 99.00 or better.