By PitGuru Frank LaMantia

The S&P and Stats

Unemployment numbers reached 9.4% - should we be freaking out? Yes and no. Remember, in order to move forward we should always look at the past. During the Great Depression, 30% unemployment was devastating. Obama thwarted higher numbers by giving bailouts to Chrysler and GM, keeping unemployment numbers down. Basically, we are dealing with two evils. One: if Obama let them both go bankrupt without selling off the pieces or by letting mergers happen, hundreds of thousands of people would be out of work. Two: his decision to do this leads our country down the path of inflation. Quick fixes and band-aids will not solve our problems, but these issues must be dealt with as they occur. As for retail sales, the phrase “the rate of decline is declining” is being thrown around the Street lately. In layman’s terms, this means over a period of time we have seen a percentage drop in the level of “badness”. For instance, Feb we had 343 billion in sales, March 338 billion, and in April 337 billion. A small fall signals we are reaching a bottom, but if a fortune 500 company goes kaput, panic and large selling could start again. The unemployment number and retail sales are extremely important to our economic recovery.

The S&P has a new trading range and I will be watching to see if this range can hold. The 925-945 area may be hard to sustain. When looking at the charts it looks like things are right on the cusp of a bullish trend. What I mean is it needs to get through 960 to beat the lows of October.

Tuesday, June 9th, we have wholesale inventory numbers forecasted to be down -1.0%. This number does affect the GDP, but is expected to have little bearing on the market Tuesday morning. Wednesday the 10th, the treasury budget number will be announced and we all know spending is the name of the game of this office. Thursday the 11th, retail sales (as we have spoken about) have been trending downward. The market expects 0.3% and many feel this is accurate, where I feel we may see an increase. Also, initial jobless reports are showing a steady decrease in job losses. This also indicated a bottom to the market which should ease consumers and help with confidence numbers in the future. We could see a lower number than expected in the 615k range. Business inventories indicate how long products are sitting on shelves and the market expects a decline of - 0.8%. Consumers are looking to save a dollar or two and will wait for bargains.

Bonds & Currencies

The general feeling of bonds is that consumers are worried about inflation and a higher yielding market. Is safe really safe? The fact is there is no such thing as a safe place, but we need to have confidence in our government. The 10 yr is trading at 94.48 with a yield of 3.84 while the 30 yr is trading at 94.75 with a yield of 4.63. The dollar has showed weakness and has traded under 81.00 for months. As currency worries and inflation talk across the globe make headlines, traders are going short the Canadian dollar, the Yen, and the Euro. This should strengthen the dollar for the short term but many are weary of how long the dollar will be around. Talk of a super currency is playing tricks with the currency market.




By PitGuru Daniel Cronin

Energies had a modest week which saw another gain in equities until falling off at the end of Friday's trading session on a rebounding USD. Crude Oil gained 3.2% to $68.44 and traded above $70 even after an unexpected build of +2 million barrels during the inventory report on Wed. Much of this rally had to do with Goldman Sachs making a bold $85 price target on the "black gold" for the end of 2009. Heating Oil gained the most of any energy this week, + 5.5% to $1.7701. Gasoline moved in line with Crude, trading higher by +3.1% to close out at $1.9546. Natural Gas gave us yet another head fake trading as high as $4.250, but got smacked back down Thursday after inventories built for another consecutive week. Natty barely closed out the week in positive territory, +.8% to $3.835.

I was looking for Crude Oil to hold that $70 mark and it did just that, trading pennies higher there until the USD ripped more than two full cents to trade under $1.40 on the Friday session. The EURO/USD traded up to the resistance point at $1.44 (which was the previous high on December 17th) and then fell back as the sell signal for commodities was triggered. We will have to see now if this is just a temporary pullback or if we are in for more of the same (stronger dollar, weaker commodities). I believe we could see Crude trade lower here to try and test the $65 level and then the 200 day continuous contract moving average around $62.50. The relative strength index for crude rose to 68.81 last week from 51.12 at the end of April, indicating prices may be poised to fall as well. Relative strength indexes show how fast prices have advanced or declined during a specified time period. Readings above 70 indicate a price may be due for a pullback, and readings below 30 indicate it may be due for a rally.

Natural Gas has been a weird one recently with the aforementioned head-fakes we have seen the past 2 months. Just when it looks like there is a nice rally in store, inventories report builds and ultimately drive down the price. This market will take a while to turn around and could trade lower than $3.00 by the end of the year. The valuation down here, although significantly low, is the only reason to get into this market as prices were previously down at these levels in 2006 after some hedge fund traders made large bets that Natty would rise like in 2005 when hurricane Katrina came into effect. Natural Gas prices went on to trade lower down to the low $3's in 06' as no major hurricanes came, leaving many hedge funds in the dust.




By PitGuru Jurgens H. Bauer

The Soft markets do not seem to be focused upon their own individual fundamentals; rather, they are taking their lead from the direction of the dollar and outside markets. The US dollar, which had been under pressure for most of the week, staged a sharp rally in response to Friday's unemployment number and that triggered lower values in most of the soft complex. While the dollar had been expected to weaken still further (when everyone's short, watch out), a wave of short covering has occurred over legitimate concerns of an increase in US interest rates. That action becomes a focus and will likely dominate the response of prices in the soft complex. This sets the tone for an interesting week ahead.

Sugar: This past week, October sugar traded in the familiar range between 16.90 and 16.10, and ended the week basically unchanged at 16.68. July followed suit by trading between major resistance at 16.05 and support at 14.90. This coming week Sugar needs a close above those resistance levels in order to stimulate an already bullish crowd. Looking for improved prices as summer approaches, but be mindful that outside macros will tend to press prices.

Cotton: Near-term direction is entirely up to the flow of speculative money. It may help US exports if prices ease, but for now they remain range-bound; although near the lower end of that range. The bigger focus for cotton now seems in the N/Z spread and the rolling of positions. Since specs (according to the weekly spec/hedge report) are holding net longs around 14% and long only index funds by definition are long, this means that as positions get rolled forward the Dec should gain in relation to the July and thus the spread should widen. Planting has been completed in most areas and insurance is set up so farmers can seek protection should problems with the crop materialize. West Texas is responsible for much of the acreage this year so any weather problems there could prove newsworthy and provide further enticement for longs. USDA Crop report due out this week, but no surprises expected. Look to establish longs via wide call spreads in CTZ options on weakness.

Cocoa: Prices lifted off on dollar weakness and speculative buying moving July from 2600 to 2780 during the week before ending close to 2700 in volatile action on Friday as July options expired. Speculative reaction to positive charts and the demand for commodities as a play against the dollar fueled the positive price move for a second week. I don't trust this market's recent strength and think buying puts an appropriate strategy.

Coffee: Early in the week, July futures attempted to break into new high ground reaching just shy of 143 on three different occasions - and each time it failed. This gave rise to an anticipated downward correction to 135 support and then a bounce. However, when prices failed to return back above 140 on the bounce (thanks to the strong move in the dollar and lack of frost projections in forecasts), disappointed longs liquidated. This leaves July poised to probe support and vulnerable to harvest selling pressure. Unless weather or outside markets give rise to bullish confidence, expect to see coffee on the defensive. Defensive action however, should allow for a good opportunity to establish longs for what ought to be a bull market. Support appears 133-131.75, 130.75-129, and then 127.50-126. Look for additional probes to the downside; but once it holds, a resumption of the larger uptrend. Looking to get long by selling puts underneath.




By PitGuru Daniel Cronin

Precious metals saw a drop in prices as the USD gained hard against other major currencies at the end of Friday's session. Gold traded down to $950 (down -1.7% for the week) and silver was lowered to $15.36 (-1.5% for the week). On the other hand, base metal Copper had a good week trading to its high of 2009 at $2.34, before closing out the week up +3.8% to $2.2810. Platinum had the best of them all as this market surged to its highest of ‘09 at $1,300 before it too gave up some gains settling at $1,286.2/oz (good for +7.5%).

The USD played a pivotal role this week, trading up to its highest level ($1.4370) since December 17th then sold off on the resistance and traded below $1.40 by week’s end. This sent gold trying to test the $1,000 mark (traded up to $990) only to get liquidated some $40 on the greenback’s rally. Support is from $950 to $930 and will only likely move on the USD's actions this week. Copper's great rally is mainly due to the recovering US markets (especially the housing market) as Copper is a big player in that department. Things seem to be looking brighter for the long term, but this market is looking overbought here and will likely pull back to the $2.20 support and even try to test the 50 day moving average down at $2.08. Platinum's run has been unbelievable the past two weeks trading higher than $1,300/oz. Although long-term this market looks great, I indeed see a pullback here as well to the $1,250 level as resistance on the upside becomes support on the downside.




By PitGuru Matthew Pierce

The previous week saw an early explosion then a choppy downside action as the market leaked in grains. Concern over S. American production and stocks levels supported old crop beans allowing the N/X spread to leave the week near highs. Quite a surprise to many with stops hit on Friday going home. We also saw heavy action in WZ-CZ with the former losing 40-cents on the week. The major reason for continued upside momentum is not fundamental, but the weak US dollar and inflated crude prices.

Looking to the week ahead we expect plenty of fundamental information. First we have crop progress and Conab (private S. American) on Monday with the former offering the best momentum heading into WASDE on Wednesday. This report offers further insight to world production with acreage set aside until the 30th. On Thursday we have export sales with low expectations again for old crop beans. My question for the trade: how long can the strong inverse last without strong export sales? The last fundamental factor for the week ahead is rain. Scattered fields still not planted demand attention and will get it if scattered rains continue this week. Any loss in acreage is a problem.

The macro side is far larger than fundamentals, with money flow a direct response to a weak US dollar and inflation concerns. The past week Goldman Sachs stated crude is worth 75/barrel and thus is bound higher. I love self-fulfilling prophecies. Keep an eye on equities with positive momentum sure to help any upside attempt, but I feel that will be hard-pressed due to technicals.

Looking technically, we are dramatically over bought on both daily and weekly charts. All indicators point to an impending correction. This correction will most likely be dramatic due to the extent of weak length the market has recently added. Assume the corn crop is in the ground on Monday afternoon. What's the next upside catalyst for corn? I'm hard pressed to find one with ample moisture pointing to a great start for the crop.

Overall, the market continues to defy technicals and flagging fundamental due to macro support. Without a strong upside move out of crude and a continually weak dollar agriculture looks ready to succumb to mounting negativity. The long term prospects remain bullish but even bull markets need to breathe. That's all that I see: a deep breath in a long term bullish scenario.



Frank LaMantia (S&P and Currency trader), Matthew Pierce (Grain Floor Trader), Daniel Cronin (Energy & Metals Broker) and Jurgens Bauer (Softs Floor Trader) are the Gurus for the Weekly Pit Review published on www.PitGuru.com by Futures Press, Inc. - hear their audio market commentary, learn more about them and sign-up for the Weekly Pit Review by visiting www.PitGuru.com



Disclaimer: Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.