A Market Review and Opinion Report For June 03, 2012

Uh-Oh

Energies
Oil spent the last weeks sailing down, in relative lock-step with the stock market selloff. Expect a small pop early this week but it should be short-lived as this market looks like 3 steps down to 1 step up type of momentum at the moment. Expect wide trading ranges and big swings in the implied vol on near term options this week. Natural gas remains a buy with straight deep out of the money long term calls. While anything is possible I would be shocked if the April 20th low didn’t hold as a major bottom in this market. Therefore this dip is a buying opportunity.

Financials
Stocks continue to selloff as expected. This is not a quick retracement, but rather a large scale correction and trend shift to a bear market. Sell the bounces. Bonds are flying high and this rally is expected – a move to 160 is not out of the question with the panic setting in over the fall of the euro currency and collapse of the European economic structure. On a technical level bonds had broken key support and suckered longs out of the market during a sharp selloff back in March. This congestion breaking move was quickly reversed and the rally that ensues off of a false breakdown can often be some of the strongest moves a market can experience.

Wake up traders – this is not a temporary market move. Bonds are rallying like no tomorrow because, well, there might not be a tomorrow. The realization that the bailout covered up major issues in the U.S. and abroad is now hitting the market hard. Throw in the failed austerity approach in the E.U. and you have a global meltdown. The idea that Spain and Greece will leave the E.U. is about as wild as it gets, and it is most definitely the start of the breakup of Europe. I am a market analyst, not a gold bug, gloom and doomer or a conspiracy theorist, but anyone looking at the current scenario would have to factor in a reasonable chance that a run on the banks could occur in the near future – both in Europe and possibly on a global scale. Putting some cash under the mattress is starting to sound a heck of lot safer these days...

The dollar is in a breakout and the momentum could run it up to 87 a lot faster than one might expect. The euro is a major sell but spreading the euro against the pound or the franc is not such a bad play. The Canadian dollar clearly broke support and is a long term sell. The Japanese yen is gaining serious momentum as the stock market sells off. A dollar pullback will likely catapult it past 130. 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
Massive volatility is hitting the grain sector, with wild moves in corn, wheat, beans and even rice. All of them are strong sells. This grain market is the best short opportunity left in my humble opinion and I recommend put buying on any rallies.

Meats
Cattle is topping off after a slow rally – really a dead cat bounce and a great opportunity to jump short. Hogs are far less likely to make fresh lows and I would avoid this market as congestion appears to be this market’s fate for the next few months.

Metals
Gold and silver spiked on the stock market selloff on Friday. The flight to quality is only strong relative to gold and silver’s relative value compared to the last 12 months. Those markets were at or near 1 year lows and that, combined with a panic out of stocks and the euro and you get yourself a one day pop in metals. This surge is short-lived and I highly recommend selling into this move. There is no flight to quality in overpriced precious metals – it’s a false psychology that won’t hold up. You can’t get an inflation hedge or a safety play in a market that was up over 500% in less than a decade.

Softs
Coffee has resumed its downtrend but near term downside is limited and balanced against upside potential making it an avoidable market. Cotton took it on the chin and completed its amazing descent from all-time high prices. This market remains pretty much untradeable but it is buy at 58. Cocoa broke through key support and the next week is very telling to the longer term trend. This market has fallen from 3800 and is hovering above 2000, with a lower weekly close this week indicating a collapse on the way. OJ is a buy down here, but not for the faint of heart. Sugar remains a strong sell.


Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. Commodities trading can be extremely risky and is not for everyone. Some trading strategies have unlimited risk. Educate yourself on the risks and rewards of such investing prior to trading. James Mound Marketing Group, the publisher, and/or its affiliates, staff or anyone associated with James Mound Marketing Group or [You must be registered and logged in to see this link.] do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (subscribers or otherwise). Information provided is compiled by sources believed to be reliable. James Mound Marketing Group, and/or its principals, assume no responsibility for any errors or omissions as the information may not be complete or events may have been canceled or rescheduled. Any copy, reprint, broadcast or distribution of this report of any kind is prohibited without the expressed written consent of James Mound Marketing Group.