The Mound Report

The Mound Report

by James Mound

Date: 03/08/10 Estimated Update: 03/15/10
Company: JMTG Brokerage & Analytics
Phone: 1-888-744-8866
E-Mail: info@moundreport.com
Website: www.MoundReport.comexternal link
General Comments

Tuesday I will release the 2010 Mega Commodity Forecast Update and Coffee Report. I have wanted for some time to find a no-obligation way to showcase my premium service Mound Trade Signals, and I thought what better time than with the release of the 2010 Trade of the Year, the Commodity Forecast Update Report and my Coffee Report 6 months in the making!  The promotional offer for $69 ends Tuesday, March 9th and comes with a free commodity wall calendar so I hope all my readers take advantage of it. http://www.futurespress.com/mega-forecast2.html

In the 2010 Commodity Update my key focus is on critical market changes that have taken place since January 5th. The markets are anything but stable and I expect March and April to be the most volatile two months for commodities since the collapse in 2008. What I believe the markets are experiencing is something that I refer to as the Rubber Band Effect. I like to view markets as going through cycles of tension. This tension occurs when the bull or bear takes control and ferociously moves price to one extreme. Flashback to 2008 with crude oil approaching $150 a barrel and a global grain/rice crisis - prices were seriously stretched at that time. This extreme pulled that Rubber Band price threshold about as tight as anyone has ever experienced. Then instead of snapping (market rubber bands rarely snap;) the markets recoiled, often plunging price at a more rapid pace than when prices were being stretched. So what happens after a rubber band stretches and then recoils? It reforms its shape. Within the scope of this reformation is an inner band, a price stretch that retests the outer price points previously reached on both extremes. Typically these tests form lower highs and higher lows. Ultimately this causes a massive pennant price chart formation on a long term basis, and price consolidations like this can often mean trouble for trend traders. Trends would, in theory, have a shorter life span than the most recent price move and limit breakout trades to smaller moves. However, being ahead of this type of action can offer significant opportunity should the forecast be correct. In the 2010 Forecast I will explore this new market environment and discuss ways to trade it and forecast the price action that lies ahead in markets like Crude Oil, Natural Gas, S&P500, the U.S. Dollar, the Vietnamese Dong, Euro Currency, Soybeans, Corn, Rice, Cattle, Copper, Gold, Silver, Coffee, Cotton, Sugar, OJ, and much more!  Sign up and benefit from the pre-release special price of just $69 - http://www.futurespress.com/mega-forecast2.html

 

Energies

Crude oil appears to have set a critical secondary top and I suspect this week ahead will offer a choppy confirmation. Natural gas has sailed down to form the last leg of a head and shoulders and a bearish chart pattern for anyone who looks at it even from a distance. This market has all the signs of shaking out the bulls and forming a capitulation bottom within the next two weeks.

Financials

The stock market appears lost in a battle of short term direction, but do not be fooled by this 'lull you to sleep' price action as this market sector is likely to erupt with downward volatility as we approach mid-March. Bonds have already signaled this with a flight to quality rally this past week. The uptrend in bonds is likely to support the U.S. dollar which I believe will sustain a rally without much price retracement. I continue to standby my prediction that:

The dollar will hit 86 before it breaks below 70 or I will stop writing the Weekend Commodities Review... forever.

The yen remains a strong buy. The Canadian dollar did top out as anticipated but the current near term technical formation suggests that for the next 3 trading days the market is at risk for a spike rally, so bears take to the sidelines and wait to pounce. The euro, pound and Australian dollar remain strong shorts.

Grains

A solid rally in wheat and corn has the grain markets buzzing again, and it is that time of year when the market builds up to the prospective plantings report.  Sure there is some reason to be interested in grains, but for me I am interested in taking advantage of any pop to get short ahead of the plantings report. Normally I wait for the report to make my forecast for the growing season but this year is different. This year I see something happening that is worth taking advantage of before the report. I unleash this strategy in my 2010 Commodities Update available at: http://www.futurespress.com/mega-forecast2.html . In the meantime let's just say the grain markets are about to heat up and I suspect there will be a great entry right around the corner. Rice remains a strong bear play.

Meats

The meat markets are riding a high that looks more like a bubble about to burst to me. Heading into critical planting season for grains spells high input cost risk for ranchers and I recommend using puts for aggressive volatility bear plays in both cattle and hogs. 

Metals

On a monthly chart the gold market filled out a critical bearish monthly bar in February, but closing near the highs is never a bearish sign for any analyst. I believe any break below the February low resumes the bearish trend. Silver should follow suit. The copper market has been all over the map as everyone focuses on China demand. I remember back a few years ago when copper began its epic rise the market was all chattering about how it would take a solid three years for supply to even begin to catch up to the demand. Now we face this nearly unlimited demand panic and I can't help but feel it's a little over-hyped here. We are talking about a country that will possibly implement laws to prevent runaway growth. The markets are not controlled by China but rather intimidated by it. Short copper here with an expectation for a move to 2.40 on this next leg down.  

Softs

Coffee has broken short term support but remains well above the long term trend line and is offering a unique buying opportunity for long term buy and hold bulls. Cocoa is breaking and technically looks like it is falling off a cliff. Puts remain a great play on its way down. Cotton is on a rocket ship higher and I suspect 2010 will offer one of the biggest rallies in cotton history as acreage will potentially see historic lows and demand makes a global comeback. Sugar has broken trend and momentum has swung bearish, but with a lack of downside volatility indicative of a market collapse.  I believe this is not the last of the sugar rally. However, there is equal weighted risk in my opinion and long strangles are really the only play I see as offering a solid risk to reward ratio. OJ is in super congestion mode and even though one could argue that it broke out of a pennant last week, all I can say is this is the OJ market folks so don't jump the gun.

OJ

try Track 'n TradeDisclaimer: There is risk of loss in all commodities trading. Commissions and fees vary per individual and therefore are not included in profit, cost and risk scenarios. Please consult a James Mound Trading Group Broker before you trade for the first time. Losses can exceed your account size and/or margin requirements. Commodities trading can be extremely risky and is not for everyone. Some option strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. James Mound Trading Group, or anyone associated with JMTG or moundreport.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (clients or otherwise). Past results are by no means indicative of potential future returns.