BISHOP’S
MARKET
OUTLOOK, 6-18-02 CRB:
From 5-31: “…The CRB is whipsawed by
weakening energies and the speculative metals
rally. But we still see the 4-18 high as very
secure at this point…”. So far 4-18 is
holding and we see no glaring pressures to break
4-18 near term. ENERGY:
A thoroughly mixed picture. CL:
From 5-31: “…Now at 25.76 (basis Jul, 25.30
Aug) CL is poised for a short-term upside blip
given the 5-29 reversal bar…but this rally is
likely to fail.
The not-yet-bullish commercials and the
weak summer season ahead all point to 5-14 as the
top in crude for some time to come...” CL
blipped upwards to peak on 6-04 then sold off to
hit 24.10 (Aug. on 6-11). The present CL technical picture is bullish on the weekly
chart, pointing to a challenge of the 5-14 high
(28.10 Aug), while the daily chart is bearish,
with high odds of taking out the 6-11 low. Which is likely to unfold? Bullish: rising commercial
position, now at neutral, and improving outlook
for distillates. Bearish: weak seasonality,
backwardation softening from the May high, and
weak oil stocks.
A stronger DX would also soften the
energies. All in all a very mixed picture. We’d
generally stay on the sidelines here but will go
out on a limb and favor the downside scenario with
initial stop at the 6-17 bar high (26.72 Aug.) and
targets to 23.00 – 23.75 area. HO:
Another mixed energy picture. Out best
interpretation is that HO looks boxed in between
the 6-11 pivot low and the April-May highs. The
technical pattern is too erratic here,
particularly the choppy selloff from the Apr high,
to pay much attention to HO. The softening
contango and increasing net long commercial
position are both mildly supportive in an
otherwise weak season. We prefer to stand aside. HU:
Very mixed: 1) 5-31 technically may have been a
pivot low 2) Commercials on the way up from net
short but not quite at rally-sparking levels yet
3) Option volatility expanding from 5-29,
supporting the 5-31 pivot low viewpoint
4) Backwardation pressures, which had been
softening from the 4-1 high may now be returning,
an early bullish sign. We’re standing aside for
the moment. NG:
Like CL, a very “mixed scenario” contract
right now. We’re waiting for greater clarity and
more favorable risk / reward. METALS:
Metals stocks may have one final upside blip while
the commodities look like pivot highs are in place
from early June. GC:
From 5-31 (@ 327 basis Aug): “…Gold is now
the most glaring speculative bubble on the
horizon…Industrial demand is zilch, lease rates
are falling, and Commercials are hugely net short.
If you’re trading GC from the long side,
keep the tightest of stops…”
Gold peaked 2 days later on 6-04.
Now at 318.10, 6-04 is very likely at least
a medium term pivot high. Note the position
unwinding from the open interest peak in late May:
speculators are unwinding their net longs at lower
prices. Commercials
remain hugely net short at this point: nowhere
near rally-sparking levels. Position short-sellers
have stops at the 6-07 and 6-14 pivot highs (328
and 324 basis Aug).
Note the GC exposure to DX: Gold has failed
to take out it’s FEBRUARY Yen and Swiss franc
highs. Should
the dollar firm at all here, that’s further
trouble for GC. SI:
A huge bullseye from 5-31: “…longs should
keep super-tight stops and look for short entry
opportunities. At this point the upsloping
trendline from the 5-14 and 5-23 lows is an
excellent low-risk entry trigger if broken…” 2
days later, silver completed a 5-wave advance from
it’s Nov ’01 lows on 6-04 then gapped down on
6-05, triggering a short-side entry with the
simple trendline break described above, closing
6-05 at 493.30 (basis Jul).
Commercials remain black-hole massively net
short and the weak Jun/Jul season is just ahead. HG:
It’s interesting that on 6-18, a huge increase
in May housing starts and building permits could
not spark a Copper rally.
On 6-04, HG completed a 5-wave rally
sequence from the Nov ’01 low.
Commercials remain hugely net short,
selling into the recent May rally.
Increasing contango pressure is at least
short term bearish, also.
We expect this selloff to reach the lower
range of current resistance, in the 72-area basis
Jul over the next few weeks. PA:
A double-bullseye from 5-31: (@345.50 basis
Sep) “…Still bearish. Palladium looks
determined to re-test the Nov. lows in the 310
range. A
PL-PA bull spread makes sense technically…”
Both the PA selloff and the PL-PA spread
performed beautifully.
PA crashed to hit 331 on 6-13 while PL
rallied from 545 (Jul) to close today at 565.80.
PA has had a sharp downside move, so keep
tight stops on any shorts. We’re still looking for a re-test of the Nov ’01 lows in
the weeks ahead. PL:
A month of platinum bullseyes. From 5-13 (@
523.3 July): “…however, with stops at 513 and
517, the PL chart offers good risk/reward for a
blip upside rally to test the 4-18 high of 558.00
and cap the rally from the Oct ’01 lows…From
5-31 (@544.30 July):… we’re still technically
looking for a test of the 4-18 high (558 Jul) with
outside targets to 575 by mid-June…” Now
at 565.80 we’ve taken out 4-18 and then some.
Longs keep simple stops on the multi-point
trendline from the 5-13 low (currently about
555.00). Let
PL run as far as it will BUT look to stop and
reverse, entering short on a trendline break. PL
toppiness is developing as: 1) easing
backwardation pressure reflects loss of internal
steam 2)
sister metal PA weaker than ever 3)
Commercials moving to seriously net short 4) PL
mining stock AMS and the XAU index both looking
very toppy with only a 50-50 likelihood to test
their May highs. BONDS/
NOTES: From
5-13: “…The current retracement looks more
like “curve re-adjustment” flowing to the
shorter end than a broad-based selloff…”
Note the on-going relative strength of the
shorter end during the rallies from the May lows.
This is probably best interpreted as a sign of
uncertainty over the strength of the U.S. economy.
Bonds are part of the “financial
quadrangle” (US, SP, GC, DX) that we’re
watching intently.
Our premise is that SP will rally,
prompting a selloff in US, both prompting a rally
in DX in turn prompting a selloff in GC.
We may be getting it in reverse with the GC
selloff underway.
1 down, 3 to go. US:
Last week, US blasted out of a bullish
ascending triangle to new 2002 highs following a
raft of weaker-than-expected economic reports.
Soft retail sales, industrial production,
business inventories, consumer sentiment, and auto
sales combined with the week’s stock collapse to
prompt a flight to Treasury quality. Even
corporate debt sold off.
Technically the strength of the rally from
the 5-14 low points to one final blip retest of
the 6-14 high.
Targets: 104-05 to 104-22 (Sept) by 6-20.
Meanwhile, commercials are moving near to
rally-capping net short levels. Keep very tight
stops on any longs.
Clue for the top: look for Sept-Dec
backwardation pressures, building since the March
lows, to subside first. TY,
FV: On-going
bullseye calls: From 5-13 (@TY 105-02 basis
June, 103-23 Sep): “…Commercials remain
loftily net long. Indicative of a curve shift from
30’s to 10, 5, and 2-year maturities…Bottom
line: the “final upside retest” story is
intact until the 5-09 lows are broken (104-190
basis TY June)…From 5-31: Now at 106-145 (June),
longs keep very tight stops near 106…” The 106 stop was never threatened and TY rallied straight up
to hit 108-255 (Jun) on 6-14!
Longs should keep tight stops (108-040 Jun,
106-235 Sep) as this rally is getting toppy.
Super bulls look at shorter maturities (TU)
as their upside probability is better. TU:
A bullseye call from 5-31 (@ 104-28
basis June, 104-04 Sep): “…TU continues to
look like substantial upside in this rally from
the apparent Wave 4 bottom in March…” TU
has rallied straight up to hit 105-18 Jun and
104-25 Sep. Commercials are now lightening up on
their net longs but nowhere near rally-capping
levels at this point. Technically, TU has an
excellent chance to take out the 11-08-01 highs
and target 106-12 to 107+ in July. CORPORATES:
Last week’s treasury rocket was truly a flight
to quality as both corporate equity and debt sold
off. Still, mid and lower-grade corporate closed end funds are
holding their own after a 3-year slide.
Credit spreads likely have maxed out.
Corporate debt should be considered as a
“yield enhancer” for a prudent portion of the
investor’s portfolio. STOCKS: As
we hit what look to be rally-springboard pivot
lows on 6-14, it’s interesting to review our
bottoming projections from our April, May, and
early June reports.
Assuming the good news of a likely summer
rally dead ahead, the bad news is that any rally
is likely to have real technical difficulty taking
out Jan and March highs.
That could change if a positive stock
market feeds on itself, boosting consumer balance
sheets and sentiment and thereby stimulating the
economy, in turn pushing the market.
This is thinking too far ahead at this
point. For now, we can see a very muddled picture:
1) Messy Dow chart
2) Weak SP and DJ commercials
3) Charts appearing “boxed in” between
their June lows and their Dec-Jan-Mar highs
4) A very late start on the summer rally
following a vote of absolutely no confidence from
the April earnings season.
We cannot emphasize strongly enough the
importance of U.S. stocks to the American economy,
particularly given the sky-high levels of consumer
and corporate debt and over-saturation of supply
in everything from homes to cars to fiber optic
cable. THE
ECONOMY NEEDS THE STOCK MARKET to inflate consumer
and business balance sheets (improving credit
worthiness), and to pump-up consumer confidence.
Monetary stimulus has failed because of the
low level of credit demand and reluctance of banks
to lend. Fiscal
stimulus has failed because of political
soundbites. The
only remaining stimuli: A) a falling dollar
B) a rising U.S. stock market.
We are getting a mild dose of A…. will we
get any B? OTC/
NDX: Our short-term bearish outlook on
5-31 has come through beautifully (@OTC 1615):
We’re sticking with our 5-04 forecast at this
point: that OTC will bottom above the 1500 to 1550
range in late May, early June. How much above, and whether the 5-07 low will hold is unclear…”
Also note our bullseye call at the 5-04
Cornerstone on the fate of the NDX: “…The NDX
is likely NOT to hold above it’s 9-21 low and
will weigh heavily on the OTC…the OTC will be a
close call to hold above 9-21…” Since
5-31, the OTC selloff exceeded our expectations,
hitting 1445.44 on 6-14 but remaining slightly
above it’s 9-21 low of 1387.
Meanwhile, as predicted, the NDX took out
its 9-21 low (1088), hitting 1055.57 with a
classic reversal bar pivot low on 6-14!
The OTC / NDX are generally well positioned
for a decent Summer rally at this point: 5-wave
selloff completions are in on 6-14 from the Dec
and Jan highs and commercials are massively net
long vs. weak short specs.
Rising option volatility from catatonic
April levels and increasing backwardation
pressures are also positives. SPX:
Our bullseye SP calls continue: From 5-13
(@1074.56 cash):
Commercials are now moving off net short
levels but appear to need lower prices before
getting seriously supportive…We still favor a
final test of the 5-07 low to “get it over
with” and drive commercials to true net long
levels and put in a believable bottom…” From
5-31 (@ 1069.55 cash): “… Now at
1069.55 the wave technicals still point to a break
below 5-07 targeting, say 1035 by early to mid
June. Note this is entirely consistent with our 5-04 forecast at
Cornerstone of an S&P bottom in the 1025 –
1050 range…”
From 5-31, the SP rallied only one day and
one point (to 1070.74 on 6-03) then crashed 89
points to hit 981.63 on 6-14!
Technically we have 5-wave completions of
the selloff from the 1-07 and 3-19 highs on the
daily chart and from the 5-17 high on 60 min.
bars. Seasonally we’re poised for at least a
summer rally from here.
See also strength in the SP 100 (OEX)
below. The
negative factoids: 1) We’d like to see a decline
in the option volatility that’s accompanied the
selloff from the March highs to complete the
picture 2) The still-short commercial position
gives us no optimism beyond perhaps a kiss of the
Jan / Mar highs 3) The general chart appearance is
weak and likely to develop a “boxed-in”
sideways pattern. DOW:
We got the direction right on 5-04 (@10006
cash): “…I look for a seasonal bottom in the
1-30 low area (+/- 9500) in late May…”
The 1-30 low congestion basically held with
exception of one spike climax bottom day (6-14),
hitting a low of 9260.
The “extended selloff” from the March
highs gives the weekly Dow chart a decidedly
weakened appearance; more akin to the boxed-in
“sideways drift” we’ve seen in the SP and
ND. Note
the DJ commercials continue to selloff, offering
no support for a strong summer rally thesis from
the 30 big caps. RUT:
From 5-04 (512.32 cash): “…look for
an on-going selloff to bottom above the Feb lows
(457 area) in late May…”
and From 5-31 (@487.47 cash): “…We see
today’s action as a few days of a blip rally,
likely followed by a final re-test of the 5-30 low
(482.60) early in June…” Well from 5-31 we
tested 482.6 and then some, hitting 446.66 on
6-14, within 9 points of our forecast on 5-04.
At this point we favor a few days of blip
upside followed by a final retest of 6-14 in the
next week or so. Commercials are moving
constructively, nearing a level from which we can
expect a decent summer rally to commence. SPECIFIC
STOCKS 1ST QUARTER PERFORMANCE:
For the period beginning 1-18 and ending 4-26:
Shorts: Closed shorts average 4.07% over 25 day
holding period. 5 open shorts with average 17.6%
profit. Longs: Closed longs average -.45% profit
over 35 day holding period. 6 open longs average
13.5% profit.
Baselines: S&P down 4.5%, OTC Composite
down 13.8%
SPECIFIC STOCKS SHORT:
Our short sale selections open as of
the 4-12 Outlook:
(entry price, current price, % profit,
current stop) From 5-13: SEBL (22.88, 15.30, 33%,
17.60) ADRX (44.84, 37.98, 15%, 40.00) HPQ (19.98,
17.87, 10%, 18.50) SPECIFIC
STOCKS LONG: Long selections open as of
4-01: (entry price, current price, % profit,
current stop) from 2-15: LION (7.45, out 6-12 @
10.20, 36%) From 5-13: VIA (48.04, out 6-12 @
47.00, -3%) DD (45.65, out 6-04 @ 44.20, -4%) FOREX:
From 5-31: “…Our MAJOR FINANCIAL
THEME continues to be an impending reversal of
fortune with the S&P and DX bottoming vs. tops
in US, Gold, and most Forex.
The continuing weak position of SP
commercials is the major fly in the ointment. They need to move net longer to support a serious US stock
rally. Stay
tuned…”
DX: A mixed picture.
Commercials behaving somewhat erratically,
coming off somewhat of net longs without a pivot
low as yet. Bearish
continuing contango pressure and expanding option
volatility. Technically
we look for a rally here but it will likely be
only a retracement followed by at least a re-test
of today’s levels. Said retracement would
obviously coincide with a mirror selloff of
several major FX, which we expect to begin by late
June. DX should also be boosted by a U.S. stock
rally which we expect may already be underway.
Just as we expect such a stock rally to
labor near it’s Jan / Mar highs, so might a DX
retracement fail and reverse for a downside test
of today’s low. Euro: A bullseye call from 5-31 (@ 9313 cash): “…Triangle congestion is now completely cleared and the next major resistance is at the top of the horizontal “box” going back to June 2000 in the 9500 area…The power of the recent rally indicates that after any blip pullback, a final surge to test the 9500 resistance is technically probable…” EC did not look back, hitting 9518 on both 6-14 and 6-18. Now, this market needs a breather. Note the softening Sep-Dec backwardation. We look for a pullback to at least the 9200 – 9300 zone then a final rally to test the 6-14 high, likely topping out in the range of 9575 (1-05 high) to 9690 (6-09-00 high). Commercial behavior, just coming off extreme net short levels is consistent with at least a short-term pivot high on 6-18 while option volatility points to one final upside rally. BP:
A total bullseye from 5-31 (@ 1.4569 cash):
“…Now that the rally is underway, I’m now
able to pinpoint a topping zone forecast on BP:
1.4700 to 1.4820 by early to mid June. MIGHT THIS
BE THE SAME TIMEFRAME FOR AN S&P BOTTOM AND A
US TOP?? The
odds are very good.
…How will we know when the BP peaks?
One clue: watch for the catatonic BP option
volatility (now at 2 year lows) to pick up!…”
BP rallied straight up to hit 1.4790 on both 6-14
and 6-17 before a climactic-looking surge to
1.4929 on 6-18.
Now look at the BP option volatility,
bouncing nicely in the past week from 2-year
lows!! Exactly the movement forecast to precede a
pivot high in BP! Meanwhile the reliable BP
commercials are moving to ever-shorter bearish
levels. Longs should keep the tightest of stops at
this point. Technically, BP has now completed a
5-wave rally sequence from the 1-28 lows and is
very ready for a selloff. Watch for a softening of
the Sep-Dec backwardation (which has accelerated
in past few days) as a pre-cursor to this forecast
top. SF:
From
5-31: “…We would expect a blip pullback here
followed by a final leg up to top out in the
6500-6600 range in June.
Note the hugely net short commercials now
at levels consistent with EVERY important top in
the SF in the past 3 years.
We expect ALL of these FX (BP, EC, SF) to
retrace vs. the DX in unison, likely triggered by
a US stock rally and rising US interest rates.
But the US stock rally is the “when and
if” key trigger…” We continue to stand by this analysis with a “two view”
outlook: Scenario 1) The major rally from the Oct
’00 lows is complete and SF has likely topped
OR Scenario 2) SF is very toppy but has one final blip upleg
remaining to the rally from the 1-31-02 pivot low. Option volatility, rising since early March but not yet at
extreme levels supports the latter scenario, while
the hugely short commercials support the former.
Either way, at least a blip pullback here
is technically very likely especially if we get a
continuation of dollar-favorable action in SP, US,
and GC. After
a blip pullback will SF make one last rally?
Technically the odds are now just over
50-50. But SF is likely to labor near recent highs
and fail in or under the solid wall of resistance
@ 6500 – 6700. Keep very tight stops on longs
and look for short-side opportunities to develop
soon.
JY: A great call from 5-31
(@ 8050 cash):
The 5-30 exhaustion gap is an ideal Wave 3
top… we expect a pullback in JY to at least the
7850 – 7900 area before a final speculative
rally to test the 8300-8400 “multiple resistance
zone”…The key to JY remains the Nikkei…” 5-30
was indeed a pivot high from which we pulled back
immediately to a cash low of 7948 on 6-12. Now the
final speculative rally forecast on 5-31 is
underway from 6-12.
I’m lowering my rally targets to the
8140–8240 range by late June to early July. The
softening JY contango is also supportive of the
final blip thesis as is the technical wave count.
More bearish is the faltering Nikkei which
probably MUST hold and rally soon if JY is to
rally. Note the on-going selloff in EWJ (Japan
I-shares). We like the sidelines. ME:
From 5-31: “…a perfect reversal bar on 5-30
setting up for what looks to be a sharp sucker
rally. We expect the current rally to reach perhaps 10.50 or so,
then selloff to test the 5-30 low and put in a
very tradable bottom…” The
forecast sucker rally was delayed by a few days,
but likely topped out on 6-18, hitting 10.4410.
We now look for a final selloff to test the
6-06 low (10.226 cash) and bottom in the 10.10 to
10.22 range by the first week in July.
With tight initial stops at recent pivot
highs (10.43 area) ME offers attractive
risk/reward in a quick short sale.
But keep tight stops as commercials are
moving to very supportive levels.
AD: Technically, AD appears
to be on a blip Wave 4 selloff from the 6-04 and
6-07 highs (5747 cash).
For AD to remain bullish, I expect the
selloff to hold above the 5420-5520 range and
bottom within the next week.
Thereafter, look for a final test of the
6-07 high, targeting 5750 to 5800 by early to mid
July. Continuing
backwardation pressure is also bullish although
the increasing option volatility reflects toppy
nervousness. The Aussie stock market (EWA
I-shares) is a major AD wildcard. EWA is toppier
on a daily basis though the weekly chart, like AD,
calls for another upleg after the current
retracement. GC is another issue, as the AD and
the mining-heavy EWA had rallied along with the
recent runup in Gold.
CD: Our comments from 5-31
still hold: “…The Canadian economy is very
strong and the domestic demand for currency shows
it. The strength of the rally from the Jan lows
points to one final upside test after any
pullback. Longs
should be very cautious as commercials are very
net short and only speculators will be
participating in that final upleg…”
The current pullback started 2 days
later with the 6558 cash high on 6-04. Now at 6476, to remain bullish, we expect this pullback to
hold above the 6430-6450 range and bottom by late
June. Thereafter, technically CD is poised for one
final “Wave 5” rally to test the 6-04 high and
target 6560 to 6600 by early to mid July.
Confirming this view is the increasing
backwardation pressure and the disinterested
sideways option volatility.
The Canadian stock market is a technical
wildcard. We have both a rally and retracement
scenario so it’s a wildcard.
The mildly bullish outlook for SP swings
Canadian stocks mildly positive for the CD also.
Much more threatening is the massively
short commercial position.
Long-side traders should keep the tightest
of stops on any CD rally plays and likely look to
exit and reverse if stopped out. MEATS:
Hog heaven. LC:
We have not as
yet seen the final plunge in LC forecast in our
5-31 report. The current situation is very mixed
and unfortunately the chart offers few clues on
the primary trend.
The current blip rally from the 5-31 pivot
low looks to have some moderate upside, perhaps to
6500 in the next few days. The softening contango
from late May supports this blip rally scenario.
However the commercials are massively net short
and the larger chart is confusing. We’re
standing aside. LH:
A major bullseye call from 5-31 (@ 47.775 basis
July): “…commercials are very net long and
Hogs have completed a 5-wave downward sequence. We
look for a bottoming formation to begin in the
days ahead. Note the collapsing option volatility
which peaked at recent congestion…” LH
bottomed immediately, formed a bullish ascending
triangle, and has rallied to hit 50.825 today.
Note the bullish increasing backwardation
pressure from the late Apr/ May bottoming zone.
We believe LH has put in an important
bottom on 5-29. A blip pullback may be expected in
this typically volatile “turning zone”, but we
prefer only long side LH trades at this point. PB:
A similar pattern to LH with the exception that
the selloff from the 3-07 high has not completed a
5-wave sequence and therefore the 6-10 bottom is
slightly more suspect.
Otherwise, PB appears to be in the process
of completing a major low in the selloff from the
Jul ’01 high. Commercials quite supportive. GRAINS:
Plenty of action. W: A great call from 5-31 (@ 282.25 July): “…We believe this rally is for real and the 4-29 low may be a very important pivot. Net long commercials should provide plenty of upside fuel over the next few weeks. Expect nervousness near 285 then a likely follow-thru to the 290-300 range. Clearing the 3-point downsloping resistance from the Jan. high (now at 290-292) will be another chart milestone. Note also the low open interest of this “forgotten” market, another bullish indication…” W rallied for 2 days, kissing and putting a 4th point on the downsloping resistance line. Then 4 days of nervousness and a solid breakout of the resistance, hitting 298 on 6-14. Note the rocket fuel provided by the combination of softening contango, very bullish net long commercials, improving seasonality, and peaking option volatility! Now at 289.25 (July), we expect a rally to break the 6-14 high and test 300 – 302 by June 25th or so.
S: A pinpoint call from
the 5-31 outlook (@ 509 July): “… Longs keep
tight stops at 500 or tighter. Given the
increasing net short commercials this rally is
likely to top out by 525.
When will Beans peak?… look for a blowoff
in option volatility that’s been steadily
increasing since the Feb lows…” The 500
stop held comfortably and Beans rallied to peak
out at 519.5 on 6-06. Note also the simultaneous
CAPPING OF OPTION VOLATILITY!!
If Beans have one last technical rally from
here, it’s 50-50 that it takes out the 6-06
high, targeting 525 by very early July.
Otherwise S is overwhelmingly bearish: 1)
Very high speculative open interest with
commercials massively net short 2) Post-peak
seasonality 3)
a mini head and shoulders developing (5-22 the LS,
6-06 the Head) and 4) softening backwardation
pressures. We favor only short situations. C:
From 5-31: “…Best to give this market a
little time to form a more discernable
bottom…” We continue to see the awkward outlines of a bottoming process
in the works. Technically C is poised at the
completion of a 5-wave selloff from the Jan ’01
and Jul ’01 highs.
Peaking option volatility and softening
contango are also supportive.
Out-of-sync are the mildly net short
commercials, the post-peak seasonality, and a mini
descending triangle forming after the 5-06 low
that looks like it wants to break downward for a
re-test. Best to be patient and look for more
solid bottoming evidence. RR:
We continue to watch Rice from the long
side. RR
confirmed a 5-wave bottoming sequence with the
apparent spike climax low on 6-11.
Peaked-out option volatility is bullish as
is the snap-back in commercials, approaching net
long territory.
We’d like to see a little more firming in
the backwardation though it’s very pronounced at
this point. All in all, for the adventurous, at
3.960 RR offers decent risk-reward with a long
side trade initial stop at the 6-12 bar low (3.75
basis July) with targets to the 6-03 high (4.785). SOFTS
/ FIBERS:
CO: Generally toppy, but
commercials behaving in erratic swings now heading
to net long.
Bearish is the 5-wave technical toppiness
and the backwardation softening to neutral.
Bullish are the supportive commercials and
the strong Aug / Sep season ahead. Best to stand
aside.
SB: We’re downshifting at
least our short-term SB outlook.
A successful test of major 2002 lows seems
very likely (2-27 at 5.03 and 4-11 at 4.94 basis
July). The
technical chart is looking for a new low to put in
an important wave 5 bottom, commercials are
massively net short, option volatility has not
peaked, contango pressures are increasing, and the
weak Jun/Jul/Aug season is dead ahead. Targeting:
460-470 by mid July. OJ:
From 5-31: “…Now at 91.80 / 90.50 (July /
Sep) we still look for at least a test of the Nov
highs in the 96.00 (Jul) area with a solid
technical shot at 100-103 by mid to late June.
Commercials remain very supportive. Great
risk/reward with stops near the 5/23 (89.90) and
5/25 (90.80) pivot bar lows…” Both the
5-23 and 5-25 pivot low stops have held. Stops
should basically follow the upsloping support
trendline connecting the Jan, Apr, and May pivot
lows of the congestion triangle.
With tight stops we still favor an upside
breakout from the triangle, technically targeting
100 to 103 by mid to late July. Very sleepy option
volatility is comfortable with the recent rally
although commercials are coming off of net longs
and would likely cap this rally near recent pivot
highs in the mid 90’s or so. KC:
Another bullseye call from the 5-31 Outlook (@
54.25 basis Sep): “…we favor the view that
Coffee will retest at least the 5-14 low (48.60 /
51.25 Jul/Sep).
Note the bearish Jun/Jul/Aug season
ahead…” Coffee began plunging the next day and hit a low of 49.00
(Sep) on 6-14! Shorts keep very tight stops and
enjoy the ride as commercials are moving
constructively to neutral. Clue for the bottom:
look for increasing contango pressure to abate
before the next pivot low is in. CT:
Approaching the top of a “sideways box”
trading pattern with mixed factoids. The Oct ’01
low looks like a 5-wave completion on a daily
basis but perhaps only a Wave 3 on a weekly chart
(making the rally from October a dead cat bounce).
A bullish ascending triangle is developing from
the Oct low making at least a short-term breakout
of horizontal resistance (41.00+) likely.
But any breakout is not likely to go very
far as commercials are moving to net short from
their net long levels supporting the recent 5-07
pivot low. Also, bearish seasonality lies ahead. Will the Oct lows hold
during any pullback? We prefer the sidelines to
watch the behavior after the next pivot high for
further clues. LB:
An interesting blip long-side setup for the
adventurous. Seriously net long commercials, decreasing contango and
bottoming option volatility are all supportive of
the bounce from the 6-10 low (256.30 basis July).
On the other hand, LB appears
“boxed-in” and we expect the Mar highs (325
area) to hold, especially given the reliably weak
Aug/Sep season ahead. Now at 272.50, a long-side
bet with initial stop at 256.50 has attractive
risk-reward over the short term.
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