May 7th, 2012, 11:17 PM
A Market Review and Opinion Report For May 6, 2012
Oil is finally starting to give way, but expect a choppy and volatile selloff. A strong U.S. dollar rally will help this market gain downside momentum. Natural gas has clearly bottomed near term and I highly recommend buying here with straight deep out of the money December calls – which to me have still got a long ways to go to catch up to fair value with the volatility I anticipate in the near future.
The employment report along with the bailout weakening elections in France and Greece has the market reeling – and for good reason. Look for considerably more downside in the stock market in the weeks ahead as a full scale retracement is underway. Bonds continue to look attractive as a buy here with further easing by the Fed almost a foregone conclusion. The dollar is the buy as the euro is finally shaking this congestion pattern for some real selling. The Japanese yen stands to be the lone beneficiary outside of the dollar as the Aussie, New Zealand and Canadian dollars are all bearish with strong trend breaks underway. I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before it hits 80 or I will quit writing the Weekend Commodities Review...forever.
Friday’s low in beans is the critical mark to close below to signal a real bear play here, but the gut says the top is in for beans and the rest of the grains sector.
A bit of a dead cat bounce in cattle last week is completely reasonable given the volatility and strength of the decline, but this market has considerable more downside left – double digits here we come! Pull the short off on hogs however, as that market is due for a bounce.
When does flight to quality disappear in the precious metals sector? When the U.S. dollar rallies strong and yanks the foreign buying demand right out of this market. Monster metals selloff underway! Copper remains a strong short on bounces as the top is in.
Coffee sold back off but is still in a congestion range, making it avoidable until a fresh low close is seen. The OJ collapse is coming to an end, at least in the near term. At this point the market is once again avoidable. Cocoa is a short along with sugar.
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