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Elgrey
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Expat finance professional living and working in Hong Kong.
  • My March-13 Strategy 0 comments
    Mar 3, 2013 11:19 PM

    In March I am interested in following commodities:

    Soyoil - I did not initiate longs in Feb because I was expecting market to loosen a bit. This happened only during last days of February. Technically speaking we are at oversold levels. Fundamentally speaking there is good news about bumper crop in Brazil and Paraguay but bad news from Argentine. Now, let's recall that Argentina is an exporter of BO and Brazil is not. Also, Brazil experiences logistics issues and it is not clear whether they manage to export soybeans timely. Beans is not a commodity which can be stored long time. However last Export Sales report was not in favor of bulls. COT shows that hedgers are bullish at these price levels but the picture of COT is not 100% perfect. Bottom line - I want to wait a bit more, possibly till next export sales report or till next COT report. It feels like value zone is very close.

    Crude Oil WTI - I am thinking of opening a long trade. From historical perspective there is a strong bullish trend from early March into late April. Technically speaking, we are at severely oversold levels. COT report is not really bullish however. Fundamentals are not bullish either - inventory levels of oil are above usual for this time of the year. Sequester failure may add to the bears camp. At the same time driving season is approaching and all bad news have been priced in already. In about month time 1Q reporting season kicks off and 1Q reports usually add to the bulls. I am thinking of opening long position in June futures and buying June puts to protect myself from possible downside.

    Cotton - I keep my protected shorts open. I am not an expert in Fibonacci wave theory but looking at daily chart makes me believe that 5th wave is about to end very soon and then a bearish trend to follow. COT shows bearish signals too. Export Sales report has shown quite big sales numbers but this is usual for this time of the year. I do hope that downturn is around the corner.

    Natural Gas - I am bullish here. Seasonally speaking NG accelerates in March. Weather reports predict colder temperature is March which should translate into higher demand. COT picture is also bullish (though not entirely perfect). Technical picture is not perfect either - on one hand there is inverse head and shoulders picture (shoulders during first and last days of Feb and head on 15th of Feb) which usually tells about the end of downturn. However, current RSI is at overbought reading which is normal for the second shoulder reading but hey what if I misread the chart? Anyway my call is to stay long and calm. I guess bears have more reasons to be worried.

    Heating Oil - currently I am bearish and intend to keep this stance for some time. Weather forecast predicts warmer March in North-East. Heating season is nearly over. Historicals say that March is the time when HO reaches the bottom. But honestly speaking I do not believe that USD2.90+ is that level. COT report is not at the point where one should expect price appreciation. But I see that the ice is getting thinner and I do not rule out changing the direction of the trade by the month end.

    Live Cattle - I keep my longs and from historical and COT perspectives trend should be bullish. Technicals approach overbought levels but not there yet and there is still room to engage into bullish camp.

    Question Marks:

    Copper - seasonals say go long, technicals support seasonals but I would like to get better signals. Either from COT side or from fundamentals.

    Coffee - I do not believe that coffee market has bottomed. But I do think that we are at the stage where price would grow a bit. Technicals are approaching overbought levels but not quite there yet. COT is taking bearish direction but, again, not there yet. Let's wait.

    Lean Hogs - hogs have taken a heavy blow recently. At the same time historical, technical, and COT indicators are approaching bullish reading. Not entirely bullish so let's wait.

    Wheat - although COT readings are very bullish, the market news are very grim. I do hope that market would reverse but I do not rule out booking losses on longs either.

    Although the sequester deadline was not met there seemed to be ongoing talks between two parties. I think they will resolve this. Same happened on New Year's Eve when they could not reach agreement before 1st of Jan but did that immediately after. They are trying the nerves of each other but it looks like Democrats have bigger guns - after all what they say is more about helping the nation as a whole while Republicans hold on keeping taxes low for rich at all cost which is not the best strategy in the long run. Even Gordon Gekko realized that greed was not good.

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