A Market Review and Opinion Report For April 22, 2012

VOLATILITY ALERT

General Comments
This weekend’s triple euro zone event (IMF $430 billion backing, French election upset, and the Netherland budget vote woes) puts a panic in the markets ahead of some serious reports due out this week. Home sales, Fed meeting announcement, and Q1 GDP all setup a volatile week in the markets. Look for this to be a monster week of volatility which means a big dollar rally, crashing stock market and surging bond and yen prices.

Energies
Oil has stuck around $100 just long enough to force a panicked long liquidation once the selling begins – read this to say the market should start to crash today. Natural gas continues to search for a bottom and I continue to recommend both a long nat gas vs short crude oil spread and straight long term deep out of the money calls in Dec. natural gas to play a volatile rally in coming months without necessarily trying to time a perfect bottom entry.

Financials
Stocks look to test the lows of this recent selloff and I expect a thorough penetration and move to 1330 on the S&P in short order. Bonds remain a buy after recovering back into its congestion zone. The dollar is a buy as it bounces off key support tested on Friday’s lows. The euro is in trouble this week and I suspect some liquidation. The yen deserved a brief retracement but that should be a catalyst for building momentum into a volatile rally. 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
A Friday bean rally sets up a test of the highs. I believe we at the top here in the grains and recommend put plays. Beans and corn should be focused on for short plays with a long wheat vs short corn recommended.

Meats
Re-read from last week: Cattle is in a bit of a freefall as expected and I recommend selling the bounces – double digit prices here we come! Hogs also broke support and are a sell.

Metals
Gold and silver offered a bit of congestion last week, but a rising dollar should force a big selloff this week. Copper remains a short.

Softs
Coffee is showing signs of supporting, but if you take a look at a monthly chart it is hard to see this market doing anything but heading south. Overall I would think coffee will congest, sucker some bulls up to as high as 190 and then fall again, this time making it to 148. Cocoa may spike up to a new near term high but overall I would be surprised if it broke through the March 28th highs, and see any bounce as an opportunity to jump short. Cotton remains avoidable while sugar and OJ are long term shorts.


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Very good post....