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The Financials Pit Review

For the week of October 5th, 2009

By PitGuru Frank LaMantia

S&P & Currencies

This week will have a focus on earnings and most investors are focused on the direction the market may turn. Last week saw a decent sell off following the employment numbers and weak GDP forecasts. Forecasts are now suggesting retailers may have a tough holiday season. Currently, the S&P is trading lower with a possible wide trading range because intraday last week it did trade down to 1010. On the up side there is little resistance and on the down side there is small resistance at 1000. I have a serious problem with earnings last quarter! First off, most of these companies laid off workers or sold arms of their business to shed debt. Does this mean they were profitable? No, this means they used tactics to show positive numbers. Saving money does not mean your company is profitable. I want to see earnings because people, businesses, or governments bought your products. Don't be fooled by earnings in a time where weak economic data has showed the recovery will take longer than expected. On a side note the toxic assets that are being bought by Alliance Bernstein, BlackRock, Wellington Management, Invesco, and TCW Group is a little annoying. Sure, let's give the people that shorted the market and ran it into the ground an opportunity to make billions. Let's break down earnings for this week.

Monday October 5th, Mosaic (MOS) and RPM International (RPM) will post earnings. Expect RPM to announce fiscal earnings to be .45 in the morning and after the bell Mosaic is expecting to earn .35 per share. Tuesday Oct. 6th all eyes will be on Yum Brands Inc (YUM) as it is expected to earn .58 per share on the market close. This company is made up of Pizza Hut, Taco Bell, and KFC and may give traders and the public a possible view of consumer spending habits. Are people eating at home or spending disposable income to dine out? Don't forget about Pepsi Bottling Company (PBG) will be a morning announcement and is expected to have an EPS (or earnings per share) of 1.05. Wednesday Oct. 7th should be a rather exciting day because Monsanto Co. (MON) and Ruby Tuesday (RT) will report earnings before the market open. Monsanto is expected to have an EPS of 0.01 and Ruby Tuesday to be 0.9. On the close Wed., Alcoa Inc. (AA) is forecasted to be down -.12. Many Wall Street companies consider Alcoa to be the heartbeat of economy and will be waiting for the company's earnings. Let's not forget about Costco (COST) which is not sure if they will showing earnings before or after the close but their EPS is forecasted to be .76. Thursday Oct. 8th has Marriott International (MAR) announcing earnings before the open and their EPS is expected to be .13. This is a sector which may struggle due to the recession. Less people are vacationing let alone spending money for an upgrade in nice hotels. Pepsi's (PEP) EPS is forecasted to be 1.02 and did not give a time for its announcement. Friday Oct. 9th Cantel Medical Corp's (CMN) EPS is expected to be 0.22 at the open. This company offers sanitizing and filtration equipment for both the healthcare industry and other sectors of the market.

The U.S. Dollar Index is trying to gain steam and showed strength last week. Currently at 76.74 and in my opinion poised to move upward near the 80 level. Though many would disagree, I feel the market has a good chance of selling off which may cause the dollar to advance. I also wanted to touch on treasuries and the fact that the 10 year is presently yielding 3.179 - which if you do your homework may seem a little low. In this environment anything is possible, but it is hard to see yields going much lower.

 

The Energies Pit Review

For the week of October 5th, 2009

By PitGuru Daniel Cronin

Very interesting week in the energy markets. A positive week even though every single economic number came in other than expected. Crude Oil rose 5.7% to close just shy of the $70 level as inventories rose 2+ million barrels. The products led this surge as Gasoline was up 7.2% to $1.7409 and Heating Oil soared 9.1% to $1.8496. Natural Gas had its second best week of the year with the November contract leading higher by 18% to $4.718.

In my opinion, the crude oil market is trying to tell us something. The market had weaker equities with the Consumer confidence and Non-Farm Payrolls coming in lower than expected; a stronger USD at one point falling below the $1.4500 mark in Euro/USD; and rising inventories in Crude Oil the last two weeks, yet the flatprice still wants to gravitate higher towards $70 and not $65. This is a very positive sign for Crude especially on Thursday when Gasoline made a move higher. Crude can only go so far as the products. If you take a look at the daily chart one can start to see a flag forming here with higher lows and lower highs from $72-$65, and this means that at the end of this one traders may see a violent spike in the market. With the front spread still very strong one can only conclude that one will likely see higher prices to come in the week ahead.

 

The Metals Pit Review

For the week of October 5th, 2009

By PitGuru Daniel Cronin

Metals had a mixed bag last week with the USD stronger sending Platinum lower by 4.4% but Gold and Silver were each up 1% as those markets showed very strong bases at the $980 and $15.50 levels respectively. Copper had a down weak as this market is waning here in the critical support zone from $2.64-$2.70.

Gold is very interesting as it is still above the $1,000 level and not going lower than $980 in the recent weeks. One stat to note is that hedge fund managers and other large speculators trimmed their bets on rising New York futures in the week ended Sept. 29, the U.S. Commodity Futures Trading Commission said last week. Net long positions fell 2.3 percent to 231,386 contracts. The positive for this market is that it did not have any huge violent swings to the downside as I have seen the last three times up at $1,000. This is usually the case when investors need to take profit in front of any significant technical number, but this is not what I have seen. If it has any negative movement in the USD this week I believe Gold futures may rise.

Copper is walking on eggshells right now trading in the tight support of $2.64-$2.70. I saw this market sell off 10 cents Thursday and another 4 cents Friday as US Non-Farm payrolls came in much weaker than expected. Be careful trading this market here. I would be a buyer at these levels with a tight stop.

 

The Grains Pit Review

For the week of October 5th, 2009

By PitGuru Matthew Pierce

The previous week saw choppy sessions all week with beans containing 920 in the range all days except Friday when the market could not achieve it. Wheat and corn did little allowing for volatility to fall out of bed with a majority of the damage done Thursday and Friday. The trade is now expected to grind lower as domestic basis bids fall as harvest continues. Volume is moving to the sidelines as the trade lacks a trading incentive. This is a time for imagination and thinking outside of simple flat price directional plays.

The week ahead appears to lack any major news until WASDE on Friday. Harvest and weather are the biggest components of the fundamental side with the USD and crude the biggest macro inputs. Starting with harvest, there are a few weather delays and if Drew Lerner at Cropcast is right farmers will have a few more this week. Not a good thing for farmers and it does support a higher domestic basis bid but this is short lived. I continue to feel a bearish stance in flat price is advised due to the massive crop expectations which keep getting larger. For example, FC Stone is looking for corn to approach 164 with beans over 44. Both are much larger than current USDA numbers that will be advised on Friday's WASDE.

Macro factors continue to direct our market with any bearish shift in the USD helping export expectations thus eating into the growing ending stocks numbers. Any bullish shift in the dollar will hinder exports drying up the gulf bid, in turn drag flat price lower.

Crude remains integral for corn in that Ethanol margins remain favorable as long as crude remains pricy. This is tenuous but still evident in the trade so continue to watch. Another aspect of underlying support is the commercial bid. After years with corn reaching 5.00 current prices look quite attractive. This is exasperated by sugar prices which have increased the price and bid for HFCS. This helps the domestic bid, especially in Decatur, IL as I have talked about on the morning calls.

From a trading perspective I have to get more creative with spread choices... as subscribers can see with certain opportunities coming to the table recently. Intermarket relationships are back in vogue due to varied S. American planting expectations. The weather situation down there has improved slightly but subsoil moisture levels are still far too low for comfort this close to decision time. This makes for an interesting trade opportunity in CZ versus SX so stay tuned for further discussion.

In closing, our growing season is all but done with only the final results left to question. The outcome is agreed upon...we are sitting on a massive crop! Subscribers should watch emails this week for position exits with current positions having moved as expected...finally. I'll be making moves, so keep your ears peeled.




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 http://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 http://www.pitguru.com/

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