MB Wealth Corp. Weekly Commentary
For June 18th – June 22nd 2007 By: Matthew Bradbard
The week ahead continues to show signs of increasing volatility, which is spilling over into every sector. This trend of increased volatility is great for commodity traders as the word volatility is really just a fancy way of saying opportunity. However, increased opportunity comes with increased risk. We trade both futures and options vying to position ourselves to take advantage of the volatility. It’s relatively light in terms of reports this week but we do have a FOMC meeting and USDA crop report next week. ___________________________________________________________________ Crude continues to consolidate within its trading range between 63.00 and 68.00. We continue to expect a push back to and through $70 later this summer on geopolitical concerns, growing demand, and impending supply disruptions. Demand for energy remains high and we are still years away from any type of real viable alternative, therefore this market has plenty of fundamental reasons to run higher. If the hurricane season is even half as bad as predicted, we will see crude oil make new all time highs this year. We have a refining problem and a case of “the tail wagging the dog” with heating oil and RBOB gasoline having a large impact in determining the directional movement in crude oil. We will be a buyer of natural gas but only at lower levels. ____________________________________________________________________ Live cattle continues to consolidate around the 90 level and most likely will stay there until we get a significant break in grains. We are looking for an entry point to get long in Feeders and once we do we are looking for a sizeable move to the upside. Hogs are range bound between 73 and 76. Pork bellies did break down recently but did find solid support around 94.75. If we revisit that level, one could get long with stops below recent lows. Indices: Stocks are trying to push to new highs but may encounter some resistance at highs reached in the first week of the month. It appears the market will be range bound until we get a clearer picture from the Fed next week. We see any short–term dips being another good buying opportunity and we should see the indices hit new highs again before mid-summer. We are a bit skeptical though, feeling the sub-prime woes will have a much further weakening impact and will keep you abreast as that plays out. _____________________________________________________________________ This has been a challenge! Watch the funds and pay attention to the weather. Wheat still bullish with supplies being the tightest in 30 years but short–term we could see a 25-40 cent correction that should be used to get long if you are not already. Soybeans have been pushing higher and are slowly making their way to 900. Corn broke out of its recent range on Friday and with momentum continuing into Sunday’s night session. Corn looks to test February contract highs. Trail stops tightly because corn is getting overbought. ______________________________________________________________________ With out any surprises the dollar is set to pullback to 81.60-82.00 this week. A move below the 100 day moving average on Friday should confirm a short–term top on Dollar. Look to take advantage of dollar weakness by entering an entry long the British pound and Swiss franc. These two currencies offer the most favorable risk/reward dynamic. Although we generally do not like to pick bottoms, the Japanese yen is in a free fall and when it finds some footing it will set up for a significant move. The carry-trade cannot be ignored and just as we are nervous about the sub-prime mess the yen weakness will not last forever. ______________________________________________________________________ OJ is trying to find a bottom around the 140 level and we feel it will. We’re looking for a rally back to at least the low to mid 150’s which would be a 50% retracement from the recent fall from the 170 level. Owning September OJ calls through what is expected to be a very bad hurricane season is a play we feel one should have monies in. Cocoa looks like it is going to attempt a move to 2000 over the next few weeks. Coffee spent the last two weeks trading sideways. We are seeing mixed signals; the charts are mildly bullish but seasonally with demand falling off and Brazil in the heart of harvest we should see a dramatic sell off. Sugar is still struggling to find a bottom and has been fooled recently with some head fakes. We are now ready to look at buying longer term calls in this market but do not throw to much money until a bottom is confirmed. Cotton is still trending up and should now be looked at for long entry opportunities but only on pullbacks. USDA crop report should support a larger move to mid 70’s if 8-10% less cotton was planted and demand picks up from China. ______________________________________________________________________ We should see both Gold and Silver bounce this week from the coiling pattern we saw last week. We feel this recent dip and sideways consolidation should be used as a buying opportunity and we are positioning in long Gold and Silver out until the end of the year. Copper has been extremely volatile, we have an upward bias with recent supply threats but remain very cautious because extreme movements.
______________________________________________________________________ |
