Wednesday, March 28, 2007

Commodity Prices

Commodity PricesSocialTwist Tell-a-Friend
Sally Limantour

Commodity prices have been moving higher as all three indices are up. While many of the markets are higher, the grain prices are lower. Many of you have emailed me asking why in last week’s class I was liquidating all of my grain positions. What technical indicators were telling me it was over? Other than RSI being over bought and trading near the top of the BB it was really a money management decision. All of these markets – corn, wheat and soybeans are up exponentially since first accumulating long positions in September and with the USDA report looming ahead of us on March 30th, I felt it was prudent to say “Thank You” and stand aside. It is not often that prices double in a matter of months as we saw in the corn market. A lot is riding (both politically and economically) on this report, so why be a hero? We can always get back in and hopefully at lower prices.
The energy markets are all moving higher and crude oil is 1.0% higher, while RBOB gasoline is 3.4% higher. The world is watching the situation with Iran and the UK and concerns over the Persian Gulf and the Straits of Hormuz are moving to center stage.

The weather is getting warmer and driving season is upon us as the nation’s refineries are low on gas! The spreads are reflecting this tight supply as the nearby spreads are trading to a premium to the deferred spreads. This does not look like a tight situation that is going away anytime soon.
Any breaks into last week’s range I would be looking at buying. Also the May/ June spread at 8 cents/gallon looks possible with stops under 5 cents. (note you can look at the mini contract and the symbol is QU).

Finally with commodity inflation heating up it is looking more and more to me like the bonds could trade to the 109 area. I will be looking for set ups to go short.

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