MARKET UPDATE
JUDY CRAWFORD
(TRADES FOR FRIDAY, OCT. 30, 2009)
888-301-8120
jcrawford@zaner.com
FOOD FOR THOUGHT: Several months ago in my Update I compared the current recession with the previous big recession in 1980 in terms of market behavior. As you recall, in 1980 after the first major sell-off of the recession (in the dow and most commodities in late 1979 - early 1980), rallies did occur before new lows were made in the markets. This time around the start of the recession was reflected with a major sell-off late last year. Since then we have obviously had a lot of rallies in numerous markets. It is now being suggested that we have seen the bottom of the recession due to the massive government spending to buoy up the economy. No one really knows but if that be the case, then are we to assume that these rallies we're seeing this year are the start of new major bull moves or setups for the next big swing down?
To help answer that, I have to ask myself what will happen after the government can't pump in any more money? Historically, a recession doesn't seem to bottom out until the consumer starts spending again, forcing capital expenditures on the part of corporations. It is a long process taking a few years and during that time (in the recession of '80 at least), commodities slumped to new lows. This time around the consumer is still saving at record numbers (which is a normal part of a recession). Bottom line in the past, it has been the consumer that is the ultimate "bailer outer" from a recession - not the government and their excessive spending - particularly to corporations who have failed to do their job. Also, we are told that unemployment has not topped. That should limit consumer spending for some time I would assume? Besides, the boom that brought about last year's bust was fueled by an excess of credit being made available to every Tom, Dick and Harry in town. That has changed so anyone who thinks we will return to the euphoric boom we had before, I think needs professional help. Doesn't any of this have to be ultimately reflected in the markets? So what happens when the government cannot print any more money and the normal process to a recession takes hold? Food for thought.
HOW SWEET IT IS: In spite of the current confusion, I noticed two interesting things. One was in sugar. In 1980 it pretty much ignored the recession and had a bull move that started before the recession hit the markets and finally topped approximately a year after the initial huge drop in the other commodities. So far, it has been giving a repeat performance. It has had a bull move that started before the current recession and only now has started to lose steam. Ironically it is losing steam about the same time of the year that it did in the 1980 recession. So are we looking at a major top in sugar? Food for thought.
LET'S BE HOGS: The other one was in hogs. In the 1980 recession, they had a major bull move that was even more extreme than sugar's. They bottomed in early 1980 and did not top until two years later in 1982 while other commodities made new lows. This time around they appear to be now bottoming - a bit later but possibly bottoming? Are they going to do what they did in 1980? Start a long term move? Food for thought.
CONCLUSION: So if these two markets do what they did in the last recession, what about the other ones? Will they do what they did then? Have rallies to set up for their next swing down to new lows? I don't know. No one really knows the outcome of this current situation but if history truly repeats itself, I think we should at least be aware of that potential. If so, so much for the recession having bottomed. Food for thought.
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TRADE ALERTS:
Buy December corn. Buy 382 ½ stop. Protective stop 353 ½. Potential projection 425.
Reasons for the Trade:
1. The monthly chart has a buy signal.
2. The weekly chart has a previous buy signal that is still intact.
3. The weekly chart has a double bottom suggesting a trend change from down to up.
4. The daily rallied back over the 20 day moving average today.
5. On the daily chart, corn closed back over the 375 support today.
6. The daily chart has two previous buy signals that are still intact.
Buy December mini wheat. Buy 512 1/4 stop. Protective stop 490 3/4. Potential projection 600.
Reasons for the Trade:
1. On the monthly chart, wheat is back over the major 500 support.
2. The monthly chart has a double bottom suggesting a trend change from down to up.
3. On the weekly chart, the current sell-off held at the 20 day moving average.
4. On the daily chart, wheat sold off to and held at the 500 major long term support and 20 day moving average. They intersect at almost the same price level - which is even stronger support.
5. The daily chart has two previous buy signals that are still intact.
Buy December bean oil. Buy 38.12 stop. Protective stop 36.60. Potential projection 41.00.
Reasons for the Trade:
1. On the monthly chart, bean oil is back over the 35.00 major support.
2. On the weekly chart, a previous buy signal is still intact.
3. On the weekly chart, bean oil rallied over the 20 day moving average three weeks ago.
4. On the weekly chart, bean oil is trading into a pennant and is breaking out to the upside. If there is follow through, there should be a continued rally.
5. On the daily chart, bean oil appears to be in the process of a second wave up.
6. Today was an outside day that can trigger a signal and market direction.
CHANGE IN OPEN STOPS:
Long December hogs from 52.75 up to 55.70.
GRAIN COMMENTS:
DEC CORN: Today it held yesterday's low and is now back over near term support. A trade could be developing. See Trade Alert for details. Closed 379 1/2, up 10 1/2.
DEC MINI WHEAT: Wheat has sold off from 575 down to 491 1/4 yesterday. It held at good support so a trade could be developing. See Trade Alert for details. Closed 503 3/4, up 9.
JAN MINI BEANS: Long term they are changing to a more positive situation technically. The recent sell-off pushed them under the 1000 support. On the weekly chart that is an issue as they have the 20 day moving average hovering right above that area to cause a further "nuisance." I would like to see them close over 1000. I think they eventually will do this but they have not done it yet. Also, their sell-offs over the last few months have tended to be more extensive than what they are showing currently. Also, unlike corn and wheat, their rally today is pushing into over two weeks of consolidation right above them that they have formed. Corn and wheat don't have that resistance. So even though they held at the 20 day moving average on the daily chart, I'll just watch them for now. Closed 987, up 16 1/2.
DEC MEAL: It has formed a key reversal bottom on the monthly and a buy signal on the weekly (three weeks ago). But like the beans, I would like to see them get over their problem area - 300.00 before I would be interested. It failed at the 290.00 support yesterday but is back over that now. Closed 295.30, up 4.00.
DEC BEAN OIL: A trade could be developing. See Trade Alert for details. Closed 37.52, up 66.
MEAT COMMENTS:
DEC HOGS: They have continued to rally with a high today at 57.62. Move stops up from 52.75 up to 55.70. Closed 57.20, up 1.25.
Position: Long 54.55 (10.26).
Projection: 59.00.
DEC CATTLE: Last time they were at a price level (87.50) that was causing problems in September. It is causing problems again. An inside day on Tuesday triggered a sell with follow through. Today's low 86.15. On the weekly chart, this same level (even up to 86.00) has stopped any rallies in cattle since early this year. The attractive part to all of this is that they are forming a huge consolidation on both the weekly and monthly charts. Based on the leader, the monthly chart, I suspect it will be for a breakout to the upside. So far, they are not showing their "hand" and trying to position in them is like trying to grab on to a greased pig. Closed 86.27, down 65.
SOFTS COMMENTS:
DEC COTTON: I attempted to sell it today. It triggered a buy instead and rallied to 68.34. The high end of their current consolidation on the daily chart is at 69.00 so I will watch for now. Closed 67.57, up 69.
JAN ORANGE JUICE: A very narrow inside day yesterday triggered a buy today with not much follow through. OJ's contract high for the rally that peaked on the 21st was 121.60. This current attempt at a rally could be to test that high. As pointed out before, OJ sell-offs have tended to be much more than what it has done to date. The current sell-off stopped at 113.40. That doesn't quite "cut it" as the saying goes. The current wave up had potential projections to 122.50 which has not been met and it doesn't have to. But possibly it will try for that first. You don't know. The number to watch right now is the 121.60 high. If it fails to take that out, I suspect the typical sell-off for OJ will start to follow through. If it does take it out, I don't see much potential except up to that 122.50 area before it starts the major sell-off. My point being is that this level, I'll just watch. Closed 118.15, up 1.90.
DEC COFFEE: It triggered a sell yesterday and sold off to 132.95. Today it rallied up to the 20 day moving average and stopped. Keep stops at 137.75. Closed 137.55, up 295.
Position: Short 134.85 (10.28).
Projection: 130.00.
DEC COCOA: The inside day mentioned in my last report triggered a sell with follow through down to the 20 day moving average. The low 32.63. Today it rallied and seems poised to try for the 34.00 resistance once again. I see nothing to do here. Just watching. Closed 33.54, up 26.
MAR SUGAR: It rallied to 22.85 today as it attempted to hold the 22.00 support. Keep stops at 23.35. Closed 22.81, up 79.
Position: Short 22.67 (10.26).
Projection: 20.00.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. Opinions are subject to change at any time and are not a solicitation or recommendation to buy or sell futures contracts or options on futures contracts. The information contained in this message has been obtained from sources believed to be reliable but is not guaranteed as to its accuracy or completeness. All known news and events have already been factored into the price of the underlying commodities discussed.
Past performance is not indicative of future results. All suggested trades are based on technical signals/indicators and do not include slippage or cost. Not all trades suggested are taken. Results are based on what the signal indicates not necessarily an actual trade. Actual results may vary.
