Wednesday, June 4, 2008

Commodities Ready to Turn Over?

Posted by TraderMark at 3:57 PM TweetThis
It would appear so from the reversals we are beginning to see. Our friend in the analyst community [Jun 2: Stop Me if You've Heard this Before - Coal is Roaring] might have nailed the exact near term top in the (coal) sector with his upgrade, within 24 hours. Now that's excellent work. :)

He was on CNBC this morning, you can view the video here, or if you read the blog the past 2 months you have heard it all before - when the stocks were 30-60% lower.

Oh analysts.... such contrarian indicators.

If this pattern plays out as the past 4-5 cycles have - the executioner will come visit the commodity stocks as the market sells off, than we'll hear the "strong dollar" theories and how the market should rally now that the consumer is paying $3.70 gas instead of $4.05, the second half rebound is even stronger of a case, and its time to buy financials, retailers and homebuilders. Then for a period of 7-10 days, we'll watch in frustration as financial stocks rocket up 20% for no good reason other than the hedge fund computers deem that as "buys", and global growth stocks will suffer (and we'll lag the market). That folly will continue for about a week and a half and then in about 3 weeks we'll go back to the same old stocks rallying.... the ones that actually have a solid business case behind them instead of "the results from earnings are gosh awful but we were expecting deathly ill awful so buy 'em up!"

This has been an identical pattern that is to the point it's getting so predictable I am having a hard time believing it will just play out that simply this time around. But just in case it does I am getting my purchases of the 2 homebuilders and 2 investment banks ready to go to launch in a few days or early next week... because it will be "early cycle recovery story and the bottom is in financials" time. Woo.

p.s. folks have you noticed that late day rally EACH of the past 3 days as the "invisible hand" makes sure we close at or above the 50 day moving average. Don't want to trigger those technical traders to sell off their stocks. I am sure it's just coincidence ;) Frankly it's starting to get so blatant, it's getting to the point of amusement. Free markets and all...

Long Ultrashort Basic Material, Ultrashort Oil & Gas in fund; long Ultrashort Basic Materials in personal account

Posted by TraderMark at 3:57 PM Comments (7) | Edit This Post | Create A New Post

7 comments:

Guy said...

TraderMark: Once again watch copper; copper ended the month above support but only by a couple of cents. This is still bullish.

Currently, copper is still at the lower end of its range and sitting right at significant support. This would be a buying opportunity.

I am not ready to call commodities dead with oil, copper, and gold still in bullish up trends. This is not day to day noise but where the bull markets are -- still.

In essence, we are going to have to wait another month to see where copper closes. Clearly, the commodity markets are facing some headwinds but in reality, it is just blustering and jawboning from the Fed chief. They don't have any other tools at their disposal. They won't be lowering or raising rates anytime soon so they just talk a good game.

June 4, 2008 4:54 PM  
shaxmatist said...

**Commodities Ready to Turn Over? **

CRB index of commodities has been going down for the last 3 weeks.

Whats is turning here and in which direction?

June 4, 2008 5:01 PM  
TraderMark said...

Guy, none of the long term will matter if they decide "its strong dollar time" - I am always laughing each time Ben says something and the market reacts with knee jerk. The guy cuts from 525 to 200 and thats a 'strong dollar policy'. Look at words not action. But I outlined the markets reaction in the last time we had Commodities are dead theme night

http://tinyurl.com/3gdjqn

So I am thinking more along those lines

Shax, I guess I should be more specific - stuff like wheat, gold and the like have been in bear for a while.

To me commodities are the "real stuff" who I believe have the best fundies irrespective of 5% global growth or 1%... fertilizer, coal, nat gas, and to some degree the mining. Oil is of course the obvious one but my main focus is fert and coal really - those will be the last to go - the generals will be shot last. If/when they go - generally you start buying 3-4 days after and then within 2-3 weeks after that point when the nonsense rallies in financials, homebuilders, and retailers play out - they go back to things that have true fundamentals. But that does not mean for a months time they can't smash these like they've done already twice this year and 4-5x going back to middle of last year.

This *has* been the pattern; we'll see if it works out so easily and in such parallel this time around.

June 4, 2008 5:07 PM  
postpone.judgement said...

To me it seems we're heading for a correction in commodities. Ignore longer term supply and demand facts for a minute: If investors get convinced that the US is in a downturn and will drag everyone else with it (as it always does - no business can ignore the hick-ups of its biggest customer) they will change investment positions accordingly. Money flowing into technology - okay, so that's recession proof... Nah, but it seems to be better than commodities. Oil has topped (at least for a week ;-) so the others will follow.

June 4, 2008 5:08 PM  
TraderMark said...

Yep thats basically been the pattern

of course technology is not recession proof but it has limited exposure to commodities... and the "2nd half recovery" crowd will wake up ahead, and one day in next week or two we'll see some terrible financial news and the stocks will be up on the news, and then we'll hear how NO really THIS is the bottom (which will be the 23rd call for a bottom) and then of course you take the retailers and homebuilders up to. It's all about institional money flow - Ben has created so much money it needs to inflate something - if it leaks out of commodities for a few weeks/month it has to go pump up the shoddy sectors. So away we go, into the fantasy land of "early cycle" this will be the 4th such move this year. If they keep doing it every 8-10 weeks one day they will nail it!

June 4, 2008 5:13 PM  
shaxmatist said...

Saudi Arabia calls for production cuts
By Nadim Kawach on Wednesday, June 04, 2008

Saudi Arabia's Shura council (parliament) will hold a series of meetings over the next two weeks to discuss a controversial proposal by a key member to curb oil production to save reserves for better prices, Saudi media reported. The council will listen to a report by deputy chairman of the Shura water and public utilities committee, Salim bin Rashid Al Marri, who will argue for cutting crude supplies to maintain the Kingdom's underground reserves.

"Marri will seek to persuade council members that the oil production must be linked to the country's actual development needs not the needs of foreign consumers," Alriyadh newspaper said in a report from the capital Riyadh. "He will tell the Council that keeping sufficient oil quantities underground is a good investment for the future as oil prices will then be higher…he will argue that this will be better than producing more oil and generating financial surpluses on the grounds these surpluses are causing inflation."

Saudi Arabia is the world's top oil exporter and its crude policy is normally determined by the King as the oil minister's job is mainly to implement that policy.

According to analysts, any major increase or decrease in the Gulf Kingdom's crude production must be approved by the Monarch, who was reported last week to have heeded a call by US president George Bush and agreed to lift output by nearly 300,000 barrels per day to cool down boiling crude prices. Saudi Arabia, which controls nearly a quarter of the world's total extractable oil deposits, has pumped an average of nine million bpd over the past year but its sustainable output capacity is almost two million bpd higher.

To face an expected increase in global demand, Riyadh is investing heavily in projects to boost its oil production capacity to 12.5 million bpd at the end of 2009 and maintain its traditional spare capacity of more than two million bpd.

"The price of oil under ground is actually higher than its current market price because it will become a unique commodity by time and demand will continue to rise because of a steady growth in the world's population," Marri told Alriyadh.

"The level of oil production in Saudi Arabia must be linked to the country's actual development and financial needs not to market prices and the need of foreign consumer. It is not wise to sap this resource just to satisfy the demand of foreign markets. Therefore, we need to revise our oil production policy before it is too late. Preserving our oil reserves is better than investing our financial surpluses which could lead to inflation."

According to the newspaper, Marri scoffed at what he called fears that the price of oil will decline after the development of more energy sources. "These fears are unjustified because they come from the consumers who are only benefiting from higher production and from the country's enemies who do not like to see prosperity and progress in Saudi Arabia," he said."Even if other major sources of energy are developed, they will remain costly and oil will remain a strong rival in the energy field. "

June 5, 2008 5:23 AM  
Dr. Baugus said...

I think CLF finally got it..Damn, a great stock. so did x.
so it's steels time today.
however, our coals still up. i watch it tick by tick. i dont trust them. watch your ipi. they will slash that to shreds cuz no legs....i love ffertilizer,b ut monsanto opened great and has a dogi..that is coming down for awhile.
careful..i ahve never had to trade like this, with my eyes on the tickers..sec by second.
insane.
went short skf financials
watch,t he g8 meeting,t hey will somehow save them. they need to fall so we can have only the real ones left. god this is so over.
i shorted the nasdaq using the qid. look at the room it has to run! join me!
careful with the smn, the market is keeping up the neucor and monsantos a little, not much but its still propped up.

June 11, 2008 4:37 PM  

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