Be Prepared for Wild Action!
End of Week Dollar Declines Cause Boards to Adjust
BY Al Martin
(9-14-08)The buy-the-dip trade in the Dec. bonds contract continued to work up until Friday’s pull-down, despite bond friendly ECRs on Friday. It became apparent that the Dec. bonds contract was "trading tired" above 120. It came down and they could not keep the fear bid in the market which tells you a lot about the belief of how damaged the credibility of US Treasury instruments is becoming in these continuous bailouts and government guarantees.
We were scalping the contract from the long side at 119.16 in the overnight session from119.16 and higher, but we left the bonds alone late session to come down. However, the bonds now in the 118.20 level will be a buy in Sunday night's session.
The soon to expire Sep. dollars contract fell sharply in Friday's trade, trading off as much as 150 as the Euro-Yen rally, so we would expect the dollar to move lower as the counter-fundamental rally in the dollar begins to get its back broken.
The Oct. sugar proved to be a consistent sell around the 12.20 level until Friday's dollar instigated bid came into the market. Sugar remains a sell however. We would be looking to sell the sugar at 12.50.
The Nov. juice contract also rallied in Friday's trade -- off of continuing uncertainty over Hurricane Ike. We would now look at rallies in the Nov. juice above 97.00 to be fresh short selling opportunities.
The Nov. lumber contract continued to move lower. However, it appears to have found some stability around 225. Remember there is still seasonal strength on this contract. We recommended to our subscribers that they take their profits in the Sep. – Nov. lumber spread that we had recommended at $2. Indeded our subscribers nailed down a $20 dollar profit in that spread.
The grain complexes moved higher Friday on the back of USDA P&P reports. Beans acted weak, and we traded the corn at limit bid. This puts the Dec. corn back into an overbought condition. Therefore, we would be looking to sell the corn in a further rally up to the 5.70 level.
Also the threatened hurricane damage in the East Texas cotton belt put in an early bid into the Dec. cotton contract, which we sold at 65.50 taking a penny out of them. We still like selling the cotton away on rallies.
We were buyers of the Dec. cocoa all day long, early in Friday's session below 2555, and sellers on rallies to 2565 and better. Cocoa appears to have found some support and a temporary floor, so we would continue to scalp it from the long side on pullbacks around the 2550 level.
Dec. coffee moved ahead on Friday on the back of the dollar declines. However, we still like selling that coffee on rallies to 1.41 or better.
The Dec. copper contract also moved up Friday, in response to dollar declines. However we like selling the contract from the short side. We would also be looking to sell the contact away at anything like 3.20 or better.
Be prepared for wild action!
The pits will be substantially influenced in Monday's trade by action in the dollar contract.