Weekly Market Summary For Week Ending Sep.21, 2007
By Al Martin
(9-24-07) Individual trades for week of Sep. 17- 21, 2007:
In Monday’s trade, we SS-4 SX 9.6975, C 9.6725.
In Tuesday’s trade, we SS-4 CLV 81.01 C 80.51, SS-2 KCZ 1.2940 C 1.2740, SS-4 CLV 80.75 C 80.50, SS-2 KCZ 1.2970 C 1.2870, SS-4 LBX 242.50 C 241.
In Thursday’s trade, we went L-4 USZ 111.04 S 111.04.
In Friday’s trade, we went L-4 USZ 110.08 S 110.12, SS-5 SBV 9.82 C 9.82, L-4 USZ 110.04 S 110.08.
The USZ contract corrected to reflect Tuesday’s Fed rate action, in Thursday’s trading session, falling to establish a session low at 109.29, further establishing a tradable bottom in the 110.00-110.08 area, leading to several tradable long-side scalps worth between ¼ and ½ point, before late-Friday trade action carried the contract to a high of 110.26.
We believe that a temporary bottom is now in place in the USZ contract, and would look to further long-side scalping on retests of the 110.04-110.08 area.
The DXZ contract also established a low in Thursday’s session, trading down into the 78.20’s area before rebounding, with a Friday high at 78.73, leading to good short-side scalping action Friday around the 78.70 area, which we had recommended in our daily trade line, a trade that was good for 20 points.
We are looking now for the dollar to establish a temporary bottom on the 78.20-30 area, and would look to scalp from the long side on any retests.
The new CLX contract fell back in Friday’s late-market action to a close of 81.30, as the contract continued to adjust to premium differential vs. the expiring Sep. contract. The oil remains dramatically overbought relative to fundamentals, and we continue to like shorting the contract and would expect a retest of the 78.50 area within the coming 10 sessions.
The GCZ contract, which had been consistently turned back on rallies into the upper 740’s, closed out Friday’s session 738.90. We think that the gold has fully reacted to dollar declines now and would look to be short-scalping the gold on any continuing failed tests of the 745-750 area.
The SBV contract, which had rallied midweek on perceived Brazilian supply tightness, fell back from a Friday’s intra-day high of 9.93, an area which we had recommended shorting. The contract went out at 9.79, with global sugar supplies still far ahead of underlying demand. We like shorting the contract at 9.80 or better, and would expect the contract to fall back to the 9.40 area.
The OJX contract, which had pushed above the previous 1.2570 high in Friday’s trade, to establish a new near-term high at 1.2805, continued to be pushed by a combination of dollar action and renewed fund interest. However, juice fundamentals remain unchanged and we believe the juice to be overbought at current levels.
The LBX contract continued to trade in a series of lower lows and lower highs throughout the week, falling back to a weekly low at 237.30 in Friday’s trade, before a late rally back to a close of 239.30. We continue to like shorting the contract on rallies to 241 or better.
The SX contract resumed its rally into fresh highs, establishing an intra-day high in Thursday’s session at 9.9650 before falling back. We think the beans are overbought at current levels, as cash supplies remain ample, and would look to short the contract on rallies back to 9.87 or better.
The PBG contract continued to pick up late-week after its recent sell-off, settling out Friday’s trade action at 86.70, up 108 on the session. However, the pork complex remains negative and we would look for a rally back to the 88.00 area for fresh shorting opportunities.
The SIZ contract, which had seen resistance at the 13.50 level, was able to break above in late-week action. However, we think the silver, at 13.60 or better, is near-term overbought, and we like selling the Dec. silver on rallies back to 13.70 or better.
The HGZ contract, which, midweek, broke out of its 3.62 high to establish a new high at 3.65, continues to be dramatically overbought vis-à-vis underlying fundamentals. Renewed fund interest in the copper has pushed the copper up to a level of about 20 cents overbought relative to underlying demand, and we continue to like shorting the Dec. copper contract on rallies above 3.60.
The KCZ contract also picked up again, due to renewed fund interest, despite continuing negative fundamentals, to trade to a high of 1.3470 in Thursday’s trade, giving back good penny short-scalping opportunities on backing-and-filling action. With Friday’s close of 1.2990, the coffee is now at least 10 cents overbought near-term, and we would expect a correction back to the 1.22 area as soon as fund buying relents.
Substantial pickup in the CCZ contract late-week, with the contract reaching a new near-term high at 1997 in Friday’s intra-day trade, before falling back to a 1983 close, as the funds came in on the long side in the cocoa throughout Friday’s session. No new fundamentals, however, in the cocoa, and indeed the supply/demand equation remains mildly negative. We feel that the cocoa now is overbought by at least $80 and would look for declines initially to test the 1930 area.
The CTZ contract established an important reversal in Wednesday’s session, off a 66.75 high, before rebuilding on light-volume fund interest to establish a Friday close at 66.08. However, cotton fundamentals continue to grow increasingly bearish, as Indian and Chinese supplies become more ample. We continue to believe the CTZ contract is a great short-scalping opportunity on rallies to 66.00 or better.
The CZ contract picked up steam late-week, on the back of a renewed ethanol bid. The contract looks like it may attempt to test the 3.81-3.83 resistance area. However, corn supplies remain ample and indeed the supply/demand equation remains bearish. We think that, despite renewed fund ‘shilling’ of the corn, the corn remains about 30 cents overbought at current levels, relative to underlying supply/demand.
The WZ contract finally began to soften after a torrid run, as the perceived 2-million-ton global deficit in wheat began to shrink. The contract was pressured in Thursday’s trade on the announcement that India will not import any more wheat for the balance of this year and that Chinese demand for wheat imports will continue to fall.
The funds have an enormous vested interest in the long side of the wheat, however we think the wheat is increasingly tired at current levels and we would expect the wheat to retest the 8.39 weekly lows in the coming 5 sessions.