Weekly Market Summaryfor Week Ending Aug. 31, 2007;
Lumber and Juice Weaken In Line With Last Week's Market Analysis
By Al Martin
(9-3-07) Individual trades for week of Aug 27-31, 2007:
In Monday’s trade, we SS-4 CLV 71.00 C 70.75, SS-4 CZ 3.5350 C 3.51, SS-4 SPU 1475 C 1472.50, L-5 CCZ 1775 S 1785.
In Tuesday’s trade, we SS-4 SPU 1465.50 C 1465.50, L-5 CCZ 1775 S 1781, SS-8 WZ 7.4050 C 7.3350.
In Wednesday’s trade, we SS-5 CCZ 1821 C 1811, SS-5 DXU 80.50 C 80.60, SS-2 KCZ 1.1750 C 1.1715, SS-8 WZ 7.4050 C 7.38, SS-4 SPU 1450 C 1447.50.
In Thursday’s trade, we SS-8 CLV 73.37 (ave.) C 73.37, SS-4 SPU 1461.50 C 1459, SS-4 LBX 261 C 259.50, SS-4 SPU 1465 C 1465, SS-4 WZ 7.8850 C 7.86.
The USU contract continued to trade higher throughout the week, with dips now being contained to the 111.00 area, with late-week new intermediate-term highs being seen around the 112 ½ area. Friday’s late pullback into the 111¾ area was in response to equity market support at the end of session.
However, the Treasury bonds continued to trade on a fear bid and continue to show equity market vulnerability. We continue to trade the USU contract from the long side on dips.
The DXU contract also spent a volatile week, rallying once again to test 81.00 in Wednesday night trade, an area that we shorted again from, mindful that we had suggested shorting the contract on rallies back to 80.80 or better. The contract fell sharply in Friday trade, coming down and breaking below the 80.50 support level, to establish an inter-day low at 80.39 before rallying late. And we like shorting this contract on rallies to 80.80 or better.
Oil moved higher late-week, with the CLV contract closing Friday’s after-market session at 74.04. We think this counter-rally in the oil is overdone, as demand continues to fall and supply continues to be ample. We like shorting the CLV contract at current levels or higher.
The GCZ contract moved irregularly higher throughout the week, with a good $8 rally in Friday’s session being held at the 682.40-683.80 resistance level, as good fear buying came into the gold late. However, we are at a level in gold that it has been consistently turned back from, and we like trading the gold on the short side at current levels, unless 686.60 can be breached on a closing basis, wherein we would look for a further rally into the 692 area.
The SBV contract spent a volatile but small range week, essentially trading in the 9.35-9.55 range, however providing consistent short scalping opportunities on rallies above 9.50. Sugar fundamentals continue to grow ever more bearish, and we continue to like scalping the contract from the short side on rallies to 9.50 or better.
In line with our last week’s predictions, the juice did begin to weaken. We saw late-week trading in the OJX contract under 1.20, with the contract settling out the week at 1.1860. With the hurricane bid now out of the market and juice fundamentals becoming more bearish, we would expect this contract will retreat to test the 1.1380 area within the coming 10 days. Trade accordingly.
The LBX contract also fell back, in line with our suggestions, to reach an intra-week low on Thursday at 256.60. We sold the contract repeatedly on rallies above 2.60 in both Thursday and Friday’s trade, covering on our standard $1.50 dips, and would continue to sell the contract on rallies into the 260.50-61.50 area, as fundamentals continue to deteriorate.
In the grain complex, the WX contract continues to exhibit strength on near-term supply tightness. However, $8/bushel wheat is frankly economically unsustainable and no matter how tight near-term supplies are, we have seen demand for wheat fall dramatically. We did finally see the contract come back in late-week, and we expect the WZ contract to come back to test the 7.40 area within the next 10 days.
Further, we like shorting the SX contract up, in that near-term supplies are plentiful, thanks to a record Argentinian bean crop.
The SIU contract continued to act well to the up side, breaching the 12.00 level, late-week, in line with a so-called ‘dead-cat bounce’ in the industrial metals. However, we think that the silver is overbought at current levels and like shorting the SIU at 12.08 or better.
The HGZ contract spent an extremely volatile week, as was promised in our last week’s recommendation, with late-week highs reaching the 3.40 level, an area that we like accumulating shorts at. Again, copper fundamentals continued to be negative, despite the fund’s efforts to run the contract up, as we expect the HGZ contract will retest the 3.0670 lows in the coming weeks.
The KCZ contract continued to break off the recent shill effort, trading as low as 1.15 in late-week selling. We think the contract has no where to go but down and would recommend selling rallies back to the 1.17 area.
The CCZ contract did finally find some support, late-week, in the 1760-1780 area, forming a good base in that zone, allowing the contract to rally up into the 1820-30 area in Friday’s trade. We think this is no more than a technical bounce and that cocoa fundamentals continue to improve. And, indeed, we shorted the cocoa consistently above 1822, and would continue to do so.
The CTZ contract moved sharply higher late-week on equity market strength, establishing an intra-day high of 61.70 in Friday’s trade, before coming down to a 60.97 close. This is nothing more than a short-covering and technical move higher. Cotton demand remains sharply bearish, and we like shorting the CTZ contract at current levels, as we feel the 56.00 area lows will be revisited.