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:
Sell December mini japanese yen. Sell 108.94 stop. Protective stop 110.85. Potential projection 107.00. Reason for the Trade:
1. The monthly chart is forming a key reversal top suggesting a trend change from up to down.
2. The weekly chart formed a key reversal top four weeks ago.
3. The daily chart is forming a head and shoulders top.
4. On the daily chart, the yen rallied up to the 20 day moving average today and stopped. It also formed a key reversal top in the process.
5. The daily chart has a previous sell signal that is still intact.
6. A sell signal would push the yen under the 109.00 support.
Sell December 10 year notes. Sell 117.095 stop. Protective stop 118.130. Potential projection 115.20.
Reasons for the Trade:
1. The monthly chart is forming a key reversal top from the 118.240 resistance level - suggesting a trend change from up to down.
2. On the monthly chart, notes are trading under the 20 day moving average. That is negative.
3. The weekly chart formed a key reversal top four weeks ago.
4. On the daily chart, notes rallied up to the 20 day MA yesterday and today and that stopped the rally. That is resistance.
5. On the daily chart, notes are in a downtrend. They have had three waves down. The recent rally could be the setup for a fourth wave down.
METALS COMMENTS:
DEC COPPER: So far the breakout to the upside has been testing the breakout and holding. Other than that, there is nothing new going on. It has a sell signal that was triggered on Tuesday but the follow through was stopped by all of the support under the market. If it can hold over 300.00, the next resistance is up at 325.00. Just watching. Closed 302.95, up 9.90.
DEC MINI GOLD: The sell signal mentioned last time followed through to 1026.90 yesterday. That was the low today - forming a double bottom. It rallied up to the 20 day MA that it violated earlier this week and stopped. That average intersects with consolidation above the market that could slow a continued rally. I see nothing to do. Closed 1047.10, up 16.60.
DEC MINI SILVER: I took profit yesterday at 16.470. It then sold off to 16.120! It held that level today and rallied to 16.7120. It now has a double bottom like the gold. To reach its 20 day MA it needs to rally a lot more as that does not come into play until approximately 1725. Just watching. Closed 16.670, up .415.
Position: Short 16.950 (10.26). Exit 16.470 (10.28). Profit $480.
ENERGIES, CURRENCIES & BONDS:
DEC MINI CRUDE OIL: It formed a huge outside day today after selling off to 77.03 when a sell signal was triggered on Monday after it traded under 79.55. That sell signal is still intact. I see nothing to do. Closed 79.87, up 2.41.
DEC MINI JAPANESE YEN: Today it gave back almost everything it gained yesterday. A trade could be developing. See Trade Alert for details. Closed 109.28, down 88.
DEC SWISS FRANC: It has been backing off from resistance on the monthly chart. It failed to hold at the 20 day MA yesterday on the daily chart but rallied back over it today and the 98.00 support level. The daily also has a double top. That coupled with the monthly chart's situation, makes me lean towards watching. The level it is backing off from on the monthly has produced extensive sell-offs in the past. I question the upside potential. Closed 98.27, up 79.
DEC DOLLAR INDEX: After a four day rally, the dollar sold off today. It did hold at the 20 day MA and the 76.00 support. Long term it is holding at the 75.00 major support but I think it needs more technical support to develop regarding a bottom. Watching closely. Closed 76.130, down .455.
DEC MINI EUROCURRENCY: I have been waiting to buy it. The problem is that there is conflict with the charts. The monthly has a buy signal but the weekly chart has now formed a double top. The daily violated the 20 day MA yesterday and closed under its major uptrend line. It is back over it today and the 140.00 support. I'm going to watch for a while. Closed 148.440, up 1.260.
DEC CANADIAN DOLLAR: It sold off deep into the major support it built between mid July and early October. It rallied today. I would like to see a close above the breakout point at 94.00 for a possible buy. Just watching. Closed 98.79, up 1.11.
DEC 10 YR. NOTES: A trade could be developing. See Trade Alert for details. Closed 117.230, down 17.
DEC BONDS: Their attempt at a rally lasted two days. They sold off over 100 points today and have been in a downtrend since the early October high. A breakout under 117.18 could produce a huge sell-off as they would then have above them a huge consolidation to content with. Closed 118.22, down 104.
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.
