Soybeans (X)…closes below 1640 will lead to another swing down. Above 16.70 we’ll see some more strength
Wheat…9 dollars will be pivotal.
Corn…7.60 will be pivotal.
Equity Indices…Futures expire tomorrow. We are in wait and see mode.
30 Yr. Bonds…need to sustain and close under 145.20 for more downside.
General Comments…
Grains…are oversold short term.
Swing counts in the Spu’s can go as high as 1540 ish. We’ve already seen 1/2 the move up. We think the market will remain firm into the end of the qtr. and possibly longer, however we will not chase strength in the indices or the names.
We’ll continue to look for Alpha in the names. Failure to cash out on 15-20% moves over a few day period will leave the investor
back to square one and having nothing to show for the exposure to risk.
Metals…we continue to be friendly. This is a market where you need to buy hard breaks. The Gold has rallied 200 dollars without
one on a 100×3 Point & Figure.
All new closing strength over 1815 Gold and 35.15-25 Silver is needed for more up.
Model Trading Portfolio
……………..
Long XCO
Long TBT 14.80 17.40-60 / 18.70/ 23
Long X
Long EWZ
Profit areas have been hit. Investors should have reduced positions. Small core longs should be left.
We continue to favor singles stocks or instruments over the broader indices, then take the money and run.
The Grains and the Softs will provide the best trading opportunities over the near term. The weather should make these instruments the better trading venues. We will look to buy 8-10% breaks. Short term these commodities have run their course putting in interim highs. The grains need to digest before we get new signals.
Corn.. 7.55 is the macro pivot and a close below will lead to good profit taking.
Medium Term View…Our medium term outlook will be updated the first week in Oct.
30 Yr. Bonds …150.15 ish now becomes our macro pivot. Closing above this level would be short term positive the Bonds and negative the Equities. We will continue to look to sell good rallies for the foreseeable future.
The Spu/Bond spread has been running the show all year.
The Bonds have not had big reactions to the latest equity swings, which just tells us that the Spu’s have been the driving force on the spread. There is not a lot of demand for minimal yields even when the equities turn negative. Now it’s all about the Bonds!
We will be monitoring the Bonds for a breakdown in the existing correlation. “Long Equities=Long Bonds” going into the fall.
Equities... last qtr had us looking for a trip to last years close ( 1250) and we came close. This qtr should be a 2 way trading affair. When the board goes Risk on as it did 6/29/12 , look for high yielding beaten up names to provide greater returns with a lower risk profile than the indices. We will use 1333 as our level for bias.
Copper…Dr. Copper caught the recent low in the Equity indices. We’ll monitor the 360 level to possibly match up with another shorting opportunity in the Equity Indices.
Gold & Silver…the June lows now become extremely important support levels.
Currencies…
AUD/USD continues to be a good risk barometer. 102.25 ish is the near term macro pivot! ( This is a multi-year level) 111 is the upside pivot. Anything in between is just that, in between….no break outs! Closes above 105.30 would be deemed near term positive. In the big picture the Aussie has completed swing counts in both directions from the 111 high to the 95 level twice over the past 2 years.
USD/JPY…79.22 will be our macro pivot. ( App 126.40 Futures). Look for this level to run the Yen crosses against the Commodity Currencies. Use the crosses as the general risk tools they’ve been all year. CAD/JPY…AUD/JPY up, it’s Risk On.
EUR/USD….“119.75” +- 100 pips….is the macro pivot. Any price action the first time into this zone should be suspect ( possible Bear Trap), however closing a couple of days below this level is key to another big swing. This level has run several 20 cent swings in the Euro. It’s a significant area! These #’s are static and will not change.
Natgas…We will continue to strategically look to buy hard breaks. The names will continue to be our preferred way to play the Natty. For the average investor the names provide more liquidity and a user friendly venue for capturing Alpha.
Grains & Softs…the summer weather market is upon us. Our long term strategy is to buy 8-10% breaks in the ETN & ETF’s.
Oil…continues to be a good demand indicator, with failed rallies telegraphing little follow through in the Equity Indices. 78 which is the 50% Fib for the life of the Futures will be a key level. When the market is Risk On the names here will provide a better trading venue for the average investor.