The Wizetrade Commodities Blog

Sugar (SBH0) set a new high price today, then sold off to close below yesterday at 28.04. This action turns in another bearish signal, a key reversal day (See yesterday's blog). Lower price action tomorrow is needed to confirm the reversal. Swing and Intermediate Trade Strategy Targets for profits could range from 25.00 all the way down to 20.50. Continued movement to the upside above today’s new high confirms the upward trend and the Fibonacci target at 32.00. Some analysts have say Sugar could reach 40.00. I say “The best Sugar trade will include a well placed stop loss.” Keep watching. (See the attached SBH0 chart)

Crude Oil is showing an inside day and in the afternoon broadcast on WTV Channel 2 from 1:00PM to 2:00PM Central I discussed the Larry Williams Inside Trade Strategy which some traders employ in the same scenario we currently find Crude Oil. I was interrupted in that chart interpretation by cheers for the University of Texas Longhorns in their National Title bout with the University of Alabama Crimson Tide tonight. I will  predict the winner of that game: Whoever plays the best will win.

Have fun...use stops!

Seldom are so many indicators and signals collectively pointing to change in direction for a commodity as Sugar has today. The candlestick on the daily chart from yesterday appears to be a shooting star. Price action today needs to confirm that reading. Today’s high of 28.35 shows more strength to the upside than yesterday’s 28.90.Will divergence set in giving us a shorting opportunity? If this market pulls back, the 28.5 area is 50% of the move from 28.90 to 27.30. 28.59, if you must have the exact location of the most common pull back area. 

There is continuing divergence in the MACD signal and the market ‘s latest rise. The divergence shows up in RSI as well. Even though the price continued to rise, the indicators grew weaker. Seasonally, for the past 30 years, the trend has changed around this time of year and the drop has been sharp. It may be the end for the E-Wave B count (if you are into that sort of thing). Wavers log in the spike to 28.90 as a blow off: 5(5)B to begin the retracement of the previous leg up.  

Finally, Commercials are beginning to buy according to the latest COT report. Some traders use commercial buying to initiate a buy themselves. They rely on the timing of “When the commercials quit buying, Buy!” to enter the market. Eventually all these indicators will catch up to the market and the selling will begin in earnest. When? That’s the big question.

Market Matters -Commodities-Oil January 6, 2010

by Scott McCormick, CMT

       Oil has been rallying for the last 4 weeks now, and maybe it's no surprise considering the cold snap that has hit most of the nation during that time. But as usual we all like to know where things are going, so here is my attempt at giving you the technical breakdown on this fossil fuel.

       After spending nearly 5 weeks, beginning in October, testing the $80-$82 level Light Sweet Crude Oil Continuous Futures Contract managed to close above this old resistance today at $83.17 (last print at 18:48 EST). Analyzing the price action since the June 2009 high Crude has formed a nice upward channel that is approximately 17 points difference from the lower channel line to the upper channel line.  So far, Crude has bounced 14.93 of the 17 points from its December low at 68.59. 

       In addition to the upper channel line there are two Fibonacci levels that I am watching that could act as resistance in the short to intermediate term.  The first Fib level is 90.24, which represents a 50% retracement of the entire decline from 147 to 33.  The second level is 93.92, or a 78.6% retracement of the difference from 110 to 33.  The reason I picked 110 is because this level acted as resistance after a two week rally from the September 2008 low.  These two levels also correspond with a range that Crude spent 9 weeks in back in late 2007 early 2008 spanning from 99-85.

       For now, it looks as though Crude will continue its march onward and upward.  Watch for resistance in the low to mid 90's, and should Crude close back below 80, then I would keep a close eye on the 68 level once again. 

Generally the markets are all counter to the USDX’s contraction to 77.57 low set at 9:30AM this morning. Undoubtedly these markets have better charts than we have seen in recent months with Long Term, Mid Term and Short Term in agreement in all markets except Cocoa, Cattle, the Soybean complex and Financials.

Soybean Meal is showing divergence in the Short Term chart and beginning to turn bearish, with the Mid Term chart volatile. We could see a significant sell off back to the 298 area to test support there. The high of 313 looks extremely weak, and may be the high for the next two days.

Cocoa needed a rest from the break above 24.40 to the current high of 35.10 (12/16/09). The current retreat hit the 3200 area today. A break below 30.20 and the range of 28.00 comes into play. Fifty percent retracement of the recent move is about 28.00. That is also where the 50 (Month) MA currently resides. The overall trend is up, but the divergence in MACD and also in RSI is worth noticing.

I don’t think the dollar is finished rising against other currencies. The flood of dollars into the Global Banking System as well as the shadow banking system may be yielding the desired results of stopping the meltdown of the economy. While the threat of collapse is still in the deck, the Toxic Asset Window and the To-Big-To-Fail mentality continue to prolong the consequences of greed.

The estimated total loans of all banks both regulated and shadow equaled $12.5 Trillion in 2007. This amount far exceeded the amount of cash on hand and inflows combined; hence the potential collapse and the need for bailouts. Since this is a global event, coupled with the lack of an alternative world currency, most investors are stuck with the dollar and the consequences of the current quantitative easing policy. It makes sense to pay back loans with cheaper dollars. After all, isn’t this what China is doing by not allowing their currency to be revalued at a higher rate?

I read many daily commentaries on where the markets are headed. Most have an underling bias slanting their current predictions, but for the most part, they all sound strangely alike. The following is a  combination, condensed and slightly edited version of their comments :

“The market is poised to go much lower on a pullback to a Fibonacci level around the 4.618 area not seen since I was a lad in Illinois. This downturn will begin today unless we set a new 52 week high after the FOMC announcement. In that case, the new high will lead to higher highs in a new truncated 8^th wave cycle 4-Cb pattern. If, as I suspect, the market turns lower, it will not be confirmed until we have a low exceeding yesterday's low. We need to see a series of cycle lower lows to say that the top is in.”

Let me get this straight, Mr./Ms. Expert! If the price moves higher, the market is moving up? But, if the price moves lower, the market is moving down? If we don’t set a new high, then the old high will remain the high until we set a new one? Wow! How much do you charge for this insight?

What the “experts” are really saying is that it all comes down to price action. Price action comes first and everything after that is interpretation. So why not use the Wizetrade Commodities lights and charts to do the interpreting for us. We can use MACD, RSI, volume and a host of additional indicators to give us additional visual high probability buys, holds or sells. The Key is good money management to insure we have enough equity capital to trade another twenty times, because we all know it’s a numbers game. As Lindsey Hall said one day, “We have to make more money than we lose!” And, that expert advice was free.

This is my last post for 2009. I hope you and yours have a very wonderful holiday and prosperous 2010. Thanks for listening to my broadcasts, and for all the contributions you make to Commodities Live.

While Sugar broke to the upside in fine style today settling at 25.00 (March contract), there is still one more obstacle in its way at 26.25, the March contract high. The move today had power and volume. There is room to the upside as RSI remains below 70 and the market has a possible target as high as 32.00 based on Fibonacci numbers. I would like to see a break above 26.25 and a pullback to 24???something to test that breakout. However, if lights and charts remain strong, I am looking for an entry long.

Cocoa looks weak. I almost went short at 34.20 (seems like 34.40 was a good place for a stop), but the market set a new daily high 34.22 as I was setting the order. I waited and am glad because we have no chart confirmation. Cocoa settled at 34.10. The failure to make a new high above 34.39 could open the door for a great shorting opportunity in the near future, but I need something beyond gut instinct to help me into that trade.

Coffee continued the strong up move as well today, but still has a way to go to break out of its range. I want to see 148 plus to confirm the move up.

If ever there was a sideways range bound market, sugar is its poster child. Clearly, there was no other present direction until prices broke above 24 today. They also closed above 24 at 24.10 just .01 (one tick) below the last high of five weeks ago. Now, the market has a chance to make anther 12 cents in the near future. Fundamentally, sugar looks to go higher long term with several European countries claiming new green fuel production plants on the drawing table. Technical buying may bring in further rallies. If Sugar sustains the rally this week, the chance exists we might not see the end of rising prices until mid January.

The Softs AKA Food and Fiber Markets seem to be independent of each other and reflective of true supply and demand influences.

Cocoa for instance, keeps setting new highs.The 2009-2010 harvest which is underway in the world’s largest producer, Ivory Coast, is anticipated to be flat or down to last year which was down 14% from normal, due to the continuing disease, aging trees, and years of political and military strife taking a toll on growers. Last year’s delayed end user buying found limited supplies, and technical buying pushed prices past all time highs reached in 1980.

Some analysts believe the strength in cocoa is being driven by the US dollar and British Sterling weakness which has brought out technical buying by investors. Today’s high reflects that continuation. But, if the dollar continues to recover, the main crops come in from West Africa and origin selling begins in earnest, a decline could begin in the next few weeks, perhaps at the end of December or early in January. Nothing cures high prices like high prices.

The Softs AKA Food and Fiber Markets seem to be independent of each other and reflective of true supply and demand influences.

Cocoa for instance, keeps setting new highs.The 2009-2010 harvest which is underway in the world’s largest producer, Ivory Coast, is anticipated to be flat or down to last year which was down 14% from normal, due to the continuing disease, aging trees, and years of political and military strife taking a toll on growers. Last year’s delayed end user buying found limited supplies, and technical buying pushed prices past all time highs reached in 1980.

Some analysts believe the strength in cocoa is being driven by the US dollar and British Sterling weakness which has brought out technical buying by investors. Today’s high reflects that continuation. But, if the dollar continues to recover, the main crops come in from West Africa and origin selling begins in earnest, a decline could begin in the next few weeks, perhaps at the end of December or early in January. Nothing cures high prices like high prices.

Maybe the delisting of the deliverable copper means nothing more than what is said:

Effective Wednesday, December 9, 2009, Commodity Exchange, Inc. COMEX (or Exchange) will implement an amendment to its Copper Futures contract, Supplement No. 2 Licensed Warehouses for Copper to remove the facility operated by South Jersey Port Corporation, (SPJC ) located in Camden, NJ, from its list of Exchange Licensed Warehouses for the storage of Copper.

South Jersey Port Corporation, an existing Exchange Licensed Warehouse for the storage of Copper, has notified the Exchange that its facility, located at Second and Beckett Streets in Camden, NJ, is no longer available for the storage of Copper deliverable against the Exchanges Copper Futures contract.   

One of the warehouses providing copper for delivery simply states it no longer wants to be listed as a delivery port. Simple enough! In looking for news of One of the oldest port authorities in the world, South Jersey Port Corporation specializes in its break bulk market niche and is in continual pursuit of emerging markets.

Tracing back to 1834 when the Port of Camden, NJ, was established, South Jersey Port Corporation was created in 1926 and put the City of Camden on the map as a world-class port. Through the decades it has grown to four terminals including Beckett Street, Broadway, Port of Salem and the new Port of Paulsboro that handle both international and domestic cargo. It’s also landlord to 30 tenants.

“We were always involved in break bulk. While other port authorities were putting so much infrastructure into cranes for containerization, we decided to stick with break bulk and found our niche. It’s worked very well,” says Joseph Balzano, South Jersey Port Corporation Executive Director and CEO. “I don’t think the business would have succeeded like it has if we had focused on containerization like others.” (quoted from Supply Chain Digital’s 01 Oct 2009 article by Sara Wolfe)

The article doesn’t detail any financial trouble caused by the recent rise in copper prices. Why delist from delivering copper? China has been buying copper in masse since 2006, and this company specializes in break bulk in its pursuit of emerging markets like China. The economic down turn has cut profits in shipments of other products South Jersey Port Corporation handles like fruit, auto industry and construction.

In 1999 Del Monte and South Jersey Port Corporation completed the construction of a 76,500sq ft temperature-controlled warehouse, “more than doubling the port’s capacity and enabling growth to rise to more than 520,000 tons of imported fresh fruits annually. South Jersey Port Corporation is Del Monte’s largest distribution center when the St. Lawrence Seaway freezes.”

“We’re a niche shipper and also handle the cocoa beans coming from West Africa and Indonesia for chocolate manufacturers like Hershey’s and Blommers; and furnace slag from Italy called GranCem™,” says Kevin Castagnola, Assistant Executive Director.

Why give up copper delivery? Maybe there isn’t enough tonnage transfer to warrant crews and machinery necessary for a profitable business venture. Maybe there isn’t enough copper available to deliver against contracts assigned by COMEX. Is there a clue here as to the future delivery of other metals specifically gold to the speculators’ increasing demanding for delivery?

This brings up the issue Jim Sinclair made several years ago: COMEX does not have the gold to deliver against speculative contracts. However, no exchange can deliver any commodity against speculative buying. Most markets are made up of about 90% speculators. It’s impossible to deliver anything except milk and eggs against the total number of long positions, but the question is now raised. If an exchange can’t deliver against demand, then what do end users and those who are speculators with long positions do?

 Is there a reserve amount of gold at COMEX sufficient against demand delivery? Time will tell, but if it doesn’t have the bullion to cover the increasing speculator demand, will it decide to tell CME Group to delist its contracts as deliverable? What happens to demand then? What happens to the price of gold? Lack of sufficient supplies could be catastrophic downline for end users as well as those seeking safety from impending hyper inflation. "Where's the gold?" may replace "Where's the beef?" as the country's favored slogan. As a matter of fact, when was the last time we audited Fort Knox?