Elgrey's  Instablog

Okie dokie… Feb is over and review is on the way:

BO - I was hunting for a value zone for the whole month and did not open any long position which I intend to do in March. We started month at overbought levels @53.28 and finished at oversold levels @49.12

CT - I opened my shorts early in Feb but then I closed them with minimal profit after bullish Export Sales reports. In the second half of the month I re-establish shorts again with protection in form of long calls. No matter what my downside will be limited. I intend to keep the position as is for now.

HO - Last 10 days of the month was my time - HO fell off 3.20 levels at below 3.00 territory. I intend to squeeze everything possible from my shorts.

LC - I called for longs but I was wrong - the price fell from 132.8 to 128 and recovered to 129.85 on the last day of the month. I still maintain a long position thinking that we have passed the worst.

O - we started at 367 and finished at 379.75 in May contract. I kept my longs open till about 387 and this was my best trade of the month.

W - and here comes my worst call of the month. Wheat fell off USD8.00 levels and lost one dollar in value. What the hell… I didn't close it yet but I am really disappointed.

OJ - started at USD1.20 and finished at USD1.278. Unfortunately I did not have heart to jump in and missed the trade.

NG - I did not make a certain call but I quit my shorts in the first half of the month, reversed direction of the trade and was right. My actions were based on weather, bullish COT report and historical trends.

PL - I was not quite sure about shorting platinum but when it soared to USD1720 I decided to make my move. Unfortunately I was to scared to lose money so I quit my shorts around 1685-1690 and missed a sky-fall into below USD1600 territory. Can't win all the money anyway.

KC - I was not sure about price direction but after studying COT reports and inventory levels in New York I opened a short trade at around USD1.48 and covered my shorts at around USD1.42 when all technical indicators started to scream about coming price bump. Good choice.

Sequester talks failed and who knows how markets will react. I am not overly pessimistic but we may take some pain. Pain will come and pass until next debt ceiling, or fiscal gap, or credit crunch, or any other trendy wording would trouble us again. I turn on one of my favorite AC/DC tracks Highway to Hell and dedicate this song to Mr. Boehner and his crew. Let's join Brian Johnson cracking voice and sing all together "…and I'm going down, all the way down I'm on the highway to hell".

In February I am interested in following commodities:

Soyoil - reason are the same as last month. At the moment I have no position and waiting for the market to release some heat and jump in again.

Cotton - we witnessed a beautiful rally in cotton during January. CT appreciated by more than 10% for no apparent reason and against common sense - huge crop, big supplies and no solid demand from China. Commercial users are bearish so I suspect that rally won't be a long-one. I opened my first careful shorts.

Heating Oil - price appreciation in the end of January has caught me unprepared and my shorts suffered a heavy blow. I did not expect such a strong move for no apparent reason. Today's price 3.15 does not seem justified in my eyes. I will be keeping it for a couple of weeks to see thing calming down but if not I will close the position because 2nd half of February is the time when HO price hits the bottom and from that movement prices begin a slow uptrend. Current price is close to historical high, so the whole thing look pretty interesting - are new highs on the horizon?

Live Cattle - I opened longs in LC a couple of days ago. Herd population reduced during last months due to drought in the US and last month a big processing facility in the US was announced for closing down and this caused prices tumble. At the same time from historical perspective LC starts bullish trend in February, so maybe are all of the above parts of the same puzzle?

Oats - I bet on price appreciation. Basically I follow the commercials.

Wheat - same as oats I am long Wheat. Drought has not gone away. It is only a matter of time to realize the issue. Also, commercial hedgers are long wheat too.

Orange Juice - I am hunting an entry point for OJ for 2 months already and every time it slips away from me. Commercial users of OJ are bullish and I am waiting for price to relax to make an entrance.

Question marks:

Oil and NatGas - heating season is almost over but driving season is approaching. Oil had a nice run up in Jan and I wonder if there is still some bullish potential. Let us not forget that we live in early post-crisis times. Injections and weather will decide NG faith. I am holding shorts now but I am looking for exits.

Copper, platinum, palladium - all of the above are at overbought levels. All of the above are at level when COT report issues sell signals. But historical cycles of all of the above say "Buy". I wonder who is right.

Coffee - the bear of the year so far. Everything is bad but during last weeks large speculators began to reduce their short positions. What's brewing in the pot?

Feeder Cattle - I do not follow this commodity much but if LC would be a success story why FC should not?

Rice - commercial buyers and bullish but historical price trends for February are bearish. I guess it is not the right time yet. Let us see.

Some of smart people I am used to listen to have changed their stance from ultra-bearish to bearish saying "Well, we've passed the worst part already and things are starting to recover". We have barely licked the wounds, yes, but the system remained the same - governments print money, tensions in the Middle East remain, EU is making tiny progress (while as always is willing to sell it like a big story) and corporations do not hire. We are in the 1Q buying spree - prepare to jump out soon, the number of parachutes is limited.

January is over and let's see where my predictions has taken me or anyone else who dared following me:

Soyoil - May contract finished December at 50.18 and finished January at 53.28.

Oil - May contract finished December at 93.16 and finished January at 98.41. Unfortunately, I missed this nice rally as one half of the month I was on business trip and the other one spent hesitating.

Copper - May contract finished December at 3.66 and finished January at 3.75. And here, same as with oil I did not have a heart to make a right move. Well, at least no wrong moves))

Heating Oil - April contract finished December at 2.98 and finished January at 3.11. My call to short energy was not correct some may say. But I never said "go short and no second thoughts", no sir. I was always saying to be careful as weather and crude oil affect the prices of HO heavily and must be seen very closely. I was shorting HO most of the month but I was making ins and outs from time to time to book profits and wait for price spikes. Currently, I hold a short position since a few days ago and it's bleeding. Anyway, I keep my spirits high - no matter what but heating season is almost finished. We had a similar story in Feb of 2012 when HO was heating up against the logic but in tact with crude oil and it did not last for long.

Natural Gas - April contract finished December at 3.40 and finished January at 3.39. My call to short is marginally successful. But same as with HO I noted that NG can't be treated carelessly. I was long, I was short and I was spreading it at different moments of January and I booked profits on every side of the trade. But mostly I was short and as of today I have a short position which I believe is justified.

Platinum - it was a question mark and I advised longs. Unfortunately, I was away from trade when the time was right but then I noticed that market went too much overbought and I opened shorts until prices cooled down a bit.

The month was good for me. Let's move to February.