Before I get into the markets, I want to briefly mention my approach to trading. My philosophy is fairly simple: I determine which markets are trending and trade in that direction. If a market is not trending, I don't trade it. I never go long in a bear market or short in a bull market. Since perfect timing is nearly impossible, I try to find entry points that involve the least amount of heat. I prefer not to be the first one to be in or out of a trend if possible. The most important part of my game plan is discipline. You've probably heard it a million times before, but I can't stress it enough. Recognize when you are wrong in a trade and get out, and ride out the trade as long as possible when you are right. Most people do the opposite--they are quick to take small profits but will ride out a losing position to the end, hoping it will turn around. Remember, you can be quite successful even if you have 50 percent winning trades, if your winners are two-three times larger than the losers. Now, let's look at the markets with these ideas in mind.

Crude Oil

NYMEX October crude is about $12 off its contract high posted on July 14 near $80 a barrel. (The day's high for the pit session was $80, but hit $80.37 in overnight electronic trade.) To me, the charts are looking bearish right now. The market has been making lower highs and lower lows, and is trending lower. I rode a short position over the holiday weekend in this market and then took my profits Tuesday as crude fell below $69 a barrel. Most people would think maybe I'm crazy for holding a short in this market over a weekend. But the way I see it, the entire world is focused on energy right now, and as we are in hurricane season, there's a lot of speculation and worry about the impact of potential storms. Most individuals would not want to be short over the weekend in case a storm hits, but if it doesn't, this can offer a great opportunity for those less-conservative types. There is an old saying in the market: buy the rumor, sell the fact. That's what happened in crude recently.

The market rallied last week amid nervousness over potential storms that were developing, and when the threat to our shores passed, the market sold off. The forecasters have been predicting a bad hurricane season this year, possibly even worse than last year. However, I think the odds of having a season like last year and a storm with the magnitude of Hurricane Katrina are slim. I'm taking a chance on a milder-than-expected season, and taking a short-term bearish view of this market as a result. I can see the low-mid $60s possible for October crude, but I could change my tune if the market hits support and starts reversing. As I mentioned before, I'm not going to be stubborn and resist the trend, whatever it may be.

The 50-day moving average has marked good support since early 2004 for crude futures, so that's what I'm keeping my eye on from a technical perspective. (See the red line in the weekly chart below.) This market is coming up on a critical support area near $66.50. If this support holds, the market should experience a period of consolidation, and rebound higher. As I mentioned before, I don't want to be first in a trade, however. I want the market to stop declining first and I don't want to catch a falling knife. I want to see some technical signs of support holding and a period of consolidation for a month or so before I get in and start buying this market.

Crude Oil, Weekly

Long-term, I do see crude headed higher and am waiting for signals to turn bullish. Commodities are driven by supply and demand, and the reality is that we have a diminishing supply of crude oil out there that won't be able to meet projected demands. So until we find an alternative fuel source, I see crude in a long-term bull market.

Natural Gas

One thing notable about natural gas is the spread between the October and November contracts. The spread settled Tuesday, September 5, 2006, at about a $2.04 premium, with October at $6 MMbtu and November at about $8.04 MMBtu. This indicates there is a $2 cost of carry for roughly 30 days of natural gas. So, natural gas in 30 days is $2 more expensive than today. This is an unusually high premium, and I'm not sure why it has happened. At some point, I think this spread will narrow back to more normalized levels, and should be more in line with about 50 cents. I've been buying October natural gas on dips and selling November on rallies with this thinking in mind. It may be that long-only commodity index funds are coming into this market, and that's impacting prices artificially. But given market fundamentals, I do see this spread narrowing.

Silver

From mid-June, the silver market has slowly trended higher, and been much stronger than the gold. The first rule I was taught as a trader is to cut your losses. The second rule is to buy strength and sell weakness. I am bullish metals and silver has been the leader, so I'm buying silver. In the past three days, this market has had a breakout to the upside from a consolidation pattern. I'm bullish long-term on this market and I do feel silver will go back and retest the early year highs, I just don't know when. I see silver somewhere in the $30 an ounce range, but timing is impossible. It could be six months, or longer. In the past, silver has been a leader on the way up, and gold has played catch-up. A spread between silver and gold is another trade I'm recommending. Keep in mind, the contracts are not equal, so you have to use the proper ratios when you trade. Silver is a larger contract than gold, so I would trade five large gold contracts for every three silver.

I expect markets to pick up in the coming weeks and more trends will come in line now that the dog days of summer are ending. I believe we've been in a cyclical commodity bull market, and it still has potential to continue and offer some exciting opportunities.

Michael Hinman is a Senior Market Strategist at Lind Plus. If you would like more information about this topic or others, you can contact him at 866-471-2048 or via email at mhinman@lind-waldock.com.

You can hear market commentary from Lind-Waldock market strategists through our weekly Lind Plus Markets on the Move webinars, as well as online seminars on other topics of interest to traders. These interactive, live webinars are free to attend. Go to www.lind-waldock.com/events to sign up. Lind-Waldock also offers other educational resources to help your learn more about futures trading, including free simulated trading. Visit www.lind-waldock.com.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.

Futures trading involves substantial risk of loss and may not be suitable for all investors. © 2006 Lind-Waldock® a division of Man Financial All Rights Reserved. Futures Brokers, Commodity Brokers and Online Futures Trading. 141 West Jackson Boulevard, Suite 1400-A, Chicago, IL 60604.