A Market Review and Opinion Report For June 24, 2012

Energies
Oil has continued its rapid descent and is likely to test $66. Any bounce should be sold into, although a $5 rally is more of a chop in this environment than a trend change. Natural gas is a great breakout buy play here and calls are highly recommended.

Financials
The stock market is weak to choppy with little bullish momentum left. Overall, the market should see new lows and a bear play is recommended, however the possibility of a chopping market in the near-term between 1280 and 1345 on the S&P is to be expected. Bonds should chop in this area with another price surge likely during the summer. The dollar is in a recovery mode after a brief retracement. A new high should be anticipated in coming weeks and the pressure on the euro could be intense. I continue to see the Aussie and Canadian dollars as trend-shifting shorts, while the Japanese yen is expected to reverse last week’s breakdown.

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

Grains
A massive rally in grains has been sparked by hot and dry weather, and there is a real risk for this year’s crops. That being said, it’s premature for this move. The crop was looking like an oversupply to me, so a drought just evens the score during a year where global demand should take it on the chin. The global economy is the real issue, but it’s a macro issue and therefore it is unlikely that the market can see it for what it is during a weather rally. Therefore, this short-term move is just what a bear on the sidelines ordered to get a great entry into a short. See how I recommend trading it in this week’s [You must be registered and logged in to see this link.].

Meats
Cattle have topped in the near-term, but this technical setup is really a coin flip over the next couple of weeks. After that a clear resumption of the bear trend should be available to play. Hogs are on a big bull run here and a short is the play at this level, however puts are recommended ahead of the anticipated volatility from Friday’s quarterly hogs and pigs report.

Metals
Gold and silver continue to establish bearish momentum and are strong shorts with new lows expected this week. The next dollar rally is likely to break these markets, and there is little to stop gold from sinking $300 or more in the coming months when a panic liquidation sets in. Puts are undervalued in my opinion, with the expected downside volatility just mentioned. Copper is in a long-term downtrend after establishing a clear top, and I see a 30% drop in price from current levels before the year is out.

Softs
Coffee has resumed its downtrend but near-term downside is limited and balanced against upside potential, making it an avoidable market. July cotton has been on a wild ride, with a sudden selloff helping to create a less volatile decline in the back months. This market remains untradeable and is off my radar and report for the time being. Cocoa is a strong short along with sugar. OJ is a buy here with straight calls.


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