Weekly Market Summary For Week Ending 9-28-07
By Al Martin
(10-1-07) Individual trades Sep 24-28, 2007:
In Tuesday’s trade, we went L-4 USZ 110.25 S 110.29, L-4 USZ 111.05 S 111.09, L-4 USZ 111.05 S 111.09.
In Wednesday’s trade, we went L-4 USZ 110.21 S 110.25, L-4 USZ 110.21 S 110.25, SS-4 CLX 79.65 C 79.40, SS-5 OJX 1.2930 C 1.2930, L-4 USZ 110.16 S 110.20.
In Thursday’s trade, we went L-4 USZ 110.23 S 110.27, SS-4 LBX 242.50 C 241, L-4 USZ 110.28 S 111.00.
In Friday’s trade, we went SS-4 CLX 81.50 C 81.50.
The GCZ contract finally broke above psychological resistance at $750 to close Friday at $750 even, up $10.10 on the session, due to pernicious dollar weakness. However, we feel that the gold is now overbought relative to fundamentals and we would look to be scalping the short side of the contract on lists back into the 753-55 area.
The USZ contract consistently rose throughout the week, propelled higher by weaker ECR’s and strong auction demand for fresh Treasury paper as the ‘credit crunch fear bid’ psychology was supplanted by a new ‘recession/inflation’ psychology emanating from recent Fed cuts and the likelihood of more to come. The contract has returned to an ECR-driven market with a fear bid now a peripheral factor. We expect the USZ contract to continue to gain strength on expected continuing calendar weakness.
The DXZ contract fell under pressure after several rally efforts on the attempt to hold the 78.00 level, finally giving way on Friday’s trade, leading to fresh shorting opportunities on the break of 78.00, covering in the 77.60/70 area. Market psychology now in the dollar contract is so dynamically bearish that we would look for a short-covering bounce back to the 78.30 level and would be trading the contract from the long side at current levels.
The CLX contract spent a wild week vacillating in a $5.40 range (78.44-83.72) with Friday’s sharp sell-off down to the 81.56 close. We think that the fund effort to shill the oil for portfolio window-dressing purposes at quarter end is now finished, and we would expect the oil to drift back down to test the important 78.20 level.
The SBV contract went off the board in Friday’s trade, subject to late-week rounds of short-covering, causing good short-selling opportunities at the 980 level, covering on 10-to-20-point dips before the contract went off the board at 956 in late Friday trade. We continue to like the sugar from the short side and would now look at shorting the SBH contract on moves above 10.20.
The OJX contract broke, as we had suggested it would in our previous week’s market summary, trading down to an intra-day low of 1.25 in Thursday’s trade, before mounting a late short-covering and fund-inspired rally in Friday’s session, to exit the week at 1.2910. We continue to like selling the contract on moves above 1.30.
The LBX contract, despite exceptionally weak housing data, had posted a late-week rally to close out Friday’s session at 248.70. We think that this contract was artificially supported by a single fund who remains long the lumber. We are short the lumber at current levels and would short more on any further rally effort, as we expect the contract to breach recent lows in the 237 area.
The SX contract traded above $10 throughout the late-week session, establishing a new 27-year high, representing good shorting opportunities to cover down in the 9.90 area. We feel that the beans are overbought at current levels and we continue to like shorting the beans on rallies back to 10.03 or better.
The PBG contract, in fact, rallied, in line with our last week’s suggestion to touch 90.00 in late-week trade, exiting Friday’s session at 89.68. We believe that the rally in the pork complex is now done, and we like shorting the contract in the 90.00 area.
The SIZ contract rallied to trade at the 14.00 level in Friday’s trade before falling back to a 13.92 close. We also believe the silver is even more overbought than the gold, due to its industrial usage component. We continue to like shorting the SIZ contract on any return to test the 14.00 area.
The HGZ contract picked up steam late-week to trade at a weekly high of 3.6830, before falling back to a Friday close of 3.64. Despite weak housing data and continuing negative fundamentals, the copper has moved higher in a renewed rally effort, along with the other industrial metals, driven by fund buying. However, the copper is now at least 20 cents overbought relative to fundamentals, and we continue to like shorting the contract on rallies to 3.66 or better.
The KCZ contract, which we had recommended shorting last week on rallies above 130, indeed fell back in this week’s trade to establish a new weekly intra-day low at 1.2730, exiting Friday’s session on a weak note at 1.28. We believe the near-term, fund-driven shill in the coffee is over and would look for rallies back to the 1.30 area for fresh shorting opportunities.
The CCZ contract attempted to move higher, early-midweek, to trade above the 20.53 area. However, the contract met consistent selling in the 20.40-20.60 zone. The contract is now dramatically overbought relative to fundamentals, and we continue to like shorting the contract on rallies back to 20.45 or better, as we expect the contract will fall back to the 19.50 area.
The CTZ contract also established a new weekly high, just above 67.20, despite bearish export numbers and bearish acreage yields, as denoted in last week’s farm report. The contract fell back almost 2 cents in Friday’s trade, and we continue to like shorting the contract on rallies to 66.00 or better, under our belief that the contract will fall back to test 60.00.
The CZ contract rallied above its 3.7150-3.7350 resistance area, to establish a new high above 3.86, leading to a tasty shorting opportunity in late Thursday action, with Friday’s close at 3.73, down nearly 14 cents, to retest resistance. The corn remains overbought at current levels, and we believe the next stop down will be a retest of the 3.65 area.
The WZ contract resumed its rally late-week, to rally into new highs above 9.50, with a weekly close at 9.39, as India announced that it will not import any wheat in the 4th quarter and a surprise announcement by China that it will not only cease importing wheat but will actually become an exporter of wheat in the 4th quarter. Although current wheat stocks remain tight, we see that the supply/demand equation is beginning to loosen and the wheat has become largely a fund-driven shill market. We would continue to short the wheat on 10-to-15-cent, intra-day rallies, covering on 2½-to-5-cent dips.