___ James Mound Trading Group ___ Toll Free: 1-888-744-8866 http://www.moundreport.com/ info@moundreport.com The Weekend Commodities Review By Head Analyst James Mound For the Week Ending August 9th, 2009 General Comments Last week I talked about the dollar and the merits behind the short and long term bullishness of the dollar against currencies like the euro and pound. Let's face it. Newsletter writers are a dime a dozen. Some figure out how to write just enough ambiguous commentary to never take a stand and others forecast just enough to show they can't forecast much at all. Very few ever take a real stake in what they predict. The dollar is such a strong element to my forecast for commodities moving forward that I feel compelled to communicate my commitment to such a forecast. The dollar will hit 86 before it breaks below 70 or I will stop writing the Weekend Commodities Review - forever. I have been writing the WCR for nearly a decade, now with thousands of readers each week, and I must admit I still love writing this newsletter. I like the hate mail as much as, if not more than, the thank you emails. Funny enough this report actually started as a bit of joke. I remember when I first started as a broker in this business and they had those squawk boxes that broadcast live from the pit so you could get opening calls and bid/offers and hear the volume trades as they happened. It was a great wild west time in commodities that has been slowly but surely made transparent and less manipulated as time has gone on (or so they think). In any case they had this one guy named Walter that would come on and do the opening calls for coffee every morning. It would go something like this: 'Coffee is called up 1 to 2 points on short covering off bad weather in Brazil. We might see some hedgers come in and sell right off the bat and push the market to a flat opening. If the forecast changes in the next few minutes, which is possible, we may see some strong institutional selling and the market may open 1 to 2 lower. See you all tomorrow - happy trading.' I used to think to myself how could this guy get paid for this garbage? So I started writing a report similar to this one that was just for my clients. If I thought coffee was going to be up 10% this week I would say so. If I thought the S&P was going to be down 20% for the year I wrote about it. If I was wrong I would admit it and if I was right I probably rubbed it in a little (you gotta have a little fun). Sometimes I would make truly outrageous calls and before I knew it a lot of people were writing in saying just how much they appreciate the cut-the-BS approach and sometimes the bizarre accuracy of these kinda out there forecasts. Next thing I know a handful of commodity websites contacted me and asked to publish the report. This lead to my book deal with Traders Press and I wrote the book "7 Secrets Every Commodity Trader Needs to Know". All of a sudden I was a full blown market analyst. Bottom line is sometimes I just call a market flat wrong. But I stand by my analysis and I try to tell everyone what I really think about a market and its next big move - and maybe how to trade it. I started writing my premium trade recommendation newsletter, Mound Trade Signals, a number of years back and it has allowed me another avenue to give specific trade recs with real detail. Yet here I am backing up a dollar forecast that has gotten more reader feedback than any forecast I have ever had. So for the first time in my career I will make a promise to you and take a stand on my forecast that is truly unprecented for me. The dollar will hit 86 before it breaks below 70 or I will stop writing the Weekend Commodities Review - forever. That is how confident I am in my forecast and how willing I am to stand by it - as all analysts should do. If you can't call it right get the heck out of the business! Energies Oil continues to congest near the highs, suggesting a bull breakout technically but the gut says a strong price correction is around the corner. It is not out of the question that they sucker the bulls in first with a quick rally, but I recommend put plays here, scaling into more puts if the market should make another move higher. The forecast is for a move to 50 by October/November. Natural gas on the otherhand is in a bit of a different situation. Fundamentally this market is so oversupplied that the bearishness feels priced in and the upside far outways the downside in the fundamental equation for me. Financials The stock market hit my 1000 target on the S&P, and while in these overbought conditions there is little to say today is the top, I suspect we are right there. Look at selling some near term calls about 5-8% out of the money. Bonds are likely to see some strength on an stock market pullback and a ratio call backspread is recommended. The dollar, as you well know, is expected to rise significantly in coming weeks and put pressure on the euro, pound, yen and Canadian dollar. The peso is no longer a strong sell.
Grains For a while I thought this would be an interesting setup in grains for a bull run, but the more this picture gets developed the more it seems overwhelmingly apparent that the grain markets are likely in for a difficult second half. Solid weather conditions are pressuring global markets and the net import needs of several countries appear to be waning as supplies are strong. A strong dollar is about all that is needed to break the grains and this past week was certainly an eerie reminder of how quickly funds can come in and sell this market. ---------------------------------------------------------- Sign Up To Receive This Report Every Weekend for FREE - Click Here! --------------------------------------------------------- Meats Meats remain bearish as grain input costs and the forecasted dollar strength will pressure markets. Hogs have a little more downside - target maybe in the low 40s . Metals Gold and silver are hanging on but the perfect storm of declining long term interest rates and a dollar rally will leave metals in a tailspin. Gold and silver are significant short plays. Copper is also a good short at these prices. Softs Coffee continues to breakout and is setup to make a major move higher in a short time frame. Look for some resistance at 140 and on a clear break through 145 this market should rocket to 160 and above. Cocoa is still a short at these prices with limited upside as it congests underneath these historic price highs. Puts are recommended, however, as futures are a bit too risky in this market. Cotton is a buy and a great contrarian grain play as global acreage, or lack thereof, is still going to be the main support for this market. Sugar is a sell with straight puts despite weather in Brazil hurting crop conditions. Lumber remains a cyclical long term buy. OJ is a buy on dips. | 
