Boards Respond as Dollar Rally Wanes
By Al Martin

(8-24-08) We finally saw a break in the DXU contract in late week trade. We had been shorting the contract at 7730 and higher covering on 10-20 point dips. The contract broke sharply in Thursday's trade, only to rally back to a close of 76.93 in Friday's trade.

However, momentum has clearly been broken in this counter-fundamental dollar rally and we would continue to short the DXU contract on rallies above 77.00. The USU contract continued to be a buy-on-dip trade for the third week, as the contract powered ahead trading in good volume above 118.00, Friday’s dip back to the 117.06 area, proving to be a stellar buying opportunity. We were buyers in the USU contract from 117.16 all the way down in Friday's trade selling back on the late rally back at 117.20 We would continue to look at buying this contract on dips below 117.16.

We were short the SBV contract and short sellers once again on the week’s rally from 14.05 up to 14.25, covering on dips back to the 13.95 area. The contract went out at 14.14 in Friday's trade. If 14.25 is breached, look for the next sell zone in the 14.35 area.

The OJX contract was a good scalping opportunity in Friday's trade where we sold the contract away at 1.0850, taking our standard 70 tick scalp, the contract responding to potential north Florida flood damage. However, we feel that the contract continues to remain a short. Watch last week’s weekly high of 1.0865; If we break out above it, look to short the contract again in the 1.10 area.

The LBX contract fell back late week. We were consistent short sellers early week in the 253 area, with 255 being the weekly high. We look for the contract to come down and test the 236 area in the coming week’s trade. We also continue to like the LBU /LBX seasonal spread.

The SX contract rallied again late week on some pickup of demand, but we feel that this contract, like all of the grains, is once again overbought according to the fundamentals, and we would expect the SX contract to come back into the 12.70s in the coming week’s trade.

The HGZ contract continued its rally propelled by commodity fund buying out of Morgan Stanley in late week trade. However, we had shorted the contract above 3.50 up to 3.55 area in Thursday's trade, expecting the end of week crack. Indeed the contract broke in Friday's trade and closed at 3.45. However we doubt the shills are done with this copper contract, but we would continue to look to sell it in the 3.50s.

The KCZ contract broke higher in late week trade. We were consistent short scalpers above 1.42 taking our standard 70 tick scalps on the pullbacks . The contract traded up to 1.45 in Friday's trade. Look to scalp this contract from the short side on a further rally to 1.4540 in Monday's session.

Also the CCZ contract moved higher establishing a Thursday high of 2850. We were short sellers at 2840. The contract fell back to establish a 2812 Friday close. We would look to sell the contract again on rallies back to 2850.

The CTZ contract was consistently turned back on rallies to 70.00 or better. Supply/ demand fundamentals continued to be moderately bearish. We like selling the contract on rallies to 70.00.

The CZ contract, which we feel is the most over-valued of the grain contracts moved back above the $6 level in late week trade. However with flagging physical demand and sharply lower cash market prices, we expect the corn to fall back into the 5.50s within the next 5 day's trade.

The WZ contract also moved back above $9 with a good pullback in Friday's session with it trading at no more than $8.20, which suggests that the wheat has further to fall.