A Market Review and Opinion Report For March 18, 2012

Energies
A bull flag continues to develop on a crude oil daily chart but don’t get fooled by this technical pattern, as it is more of an indicator of volatility expansion than direction. The bottom line for oil is there should be a lull in fundamental supply and demand drivers over the next 3 months, with the risk of an Iran-Israel-U.S. conflict remaining as an ever present potential catalyst for an epic oil rally. Right now employment in the U.S. is very bullish, Greece is seemingly recovering, and the stock market seems to have no end to its weekly fresh highs. This is when you should be CONTRARIAN! Now is the time to anticipate trend reversals. The good news is out and look at what is out there for risk factors – U.S. housing, Portugal, Spain and yes even Germany should be areas of concern. I expect oil to break this week and take commodity prices with it.

Financials
The S&P500 is now at the end of one of the biggest bull runs of any 5 month period in history – a staggering 22.7% since Thanksgiving! Strong and steady, absorbing retracements in a matter of days, this market rally is ready to turn hard and fast. I recommend straight puts. June T-bonds need to close above 137 to turn the market, something I anticipate will occur this week. The dollar is choppy but bullish and should continue to rally this week. The yen is at a critical support juncture and I believe a quick reversal to 130 is likely. I continue to stand by my forecast that:

The Japanese Yen futures will hit 140 before it hits 80 or I will quit writing the Weekend Commodities Review...forever.

Grains
Soybeans might have topped on Friday, with a close below 13.63 on the May contract on Monday indicating a possible turning point. The market is overbought and has diverged substantially from corn and beans. This week’s Mound Trade Signals Premium Service offers my recommended trade in soybeans. Look for all the grains to turn bearish this week, ahead of the big plantings report at the end of the month.



Meats
Cattle continues to offer sell signals, with a bear move expected to run through April. Hogs broke down last week but are still stuck in a longer term congestion pattern.

Metals
A big selloff in metals last week should be just the beginning of an epic collapse. Jump short on bounces with bear put spreads designed to partially offset the outrageous put premiums. Copper remains a long term short on a declining rate of growth in China.

Softs
Coffee needs to close below Friday’s low on Monday to continue its bearish momentum, otherwise a short squeezing rally may ensue for a week or so. Overall I would look at any bounce as an opportunity to establish a short at a value in this market heading for 160. OJ is a short while sugar made a major rebound move – a bit of a technical shocker – and would be hard to short at this point. Cotton is avoidable. Cocoa reversed a big-time selloff and I wouldn’t touch it until it broke those lows from Friday (2169 on May), after which it could gather some serious downside momentum.

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