29 June 2007

Soybeans, Cotton...Big Day

News this morning in the grain markets revealed that the number of acres that have been planted with soybeans is seriously deficient. This is bullish news for traders in the bean complex with Soybeans going limit up early in the session... thats 50 points!

Those that positioned themselves long in this weeks consolidation at around the 840 cents level will quite naturally be ecstatic with the November contract closing the day at 883.5 cents.

Wheat and corn joined in the volatility but with big moves DOWN.

Cotton also gapped up on similar news of lower acerages.

Farmers trying to cash in on the demand for corn is where those soybean and cotton acreages have gone to, so it is reasoned that there may be an excess of corn come harvest time.

Charting Support & Resistance on Futures... Hmmmmm

Charting support and resistance on commodity futures charts can be a bit tricky. The futures price will be the cash price of the commodity plus carrying costs, so deferred contracts can be higher priced than the nearest contract as the physical commodity may have to be held in storage longer. This is referred to as contango.

However, some factors may make the deferred contracts price less than the nearer contracts. This may be lack of immediate demand for deferred delivery, new crop verses old crop supply, as a couple of quick examples.

This has ramifications when looking at charts over the longer term. When looking at a chart of a single contract where cost of carry has been priced in that cost will naturally decay as time goes by, similar to, but nowhere near the extent, of an options contract. This also affects the continuous chart. When one contract expires the next contract is simply tacked on to the continuous chart. The expiring contract's cost of carry will have decayed away to zero, while the new contract being added will have carrying costs reflecting the time till expiry.

Consider the two charts below. The first is The August 2007 contract and the second is the continuous contract.

Notice the difference between the two charts. The August contract shows the recent $70 resistance as have just been broken, yet the continuous shows resistance at a lower level. It also shows some other differences shown by the lower red line in each chart.

This is a profound difference for those used to charting share prices where such factor do not exist.

My approach is to chart short term support and resistance on the individual contract, but to chart long term support and resistance on the continuous chart. Where is the dividing line? That's a tough one; over the time frame of the above two charts is a grey area which I don't have an answer for.

In the end it depends how you trade and what your view of technical analysis. I'm more of a swing trader so the long term charts are more of an academic interest and do analysis on individual contracts, but that's just my way.

Something to be aware of for chartists.

28 June 2007

Oil above $70... Again

Yesterday we had the news of dwindling Gasoline stocks resulting in a nice setup for a potential flag breakout in Crude. Not surprisingly, demand on Crude has pushed the price up for both a technical break of the flag, but also overhead resistance at ~$70.

Longs will be watching closely at this level to see if they can break the $70 convincingly.

Oil Hits $70 a Barrel

Is Gold Real Money, Or Just Another Bloody Commodity?

I've often pondered this question myself. From my own observations as an inveterate chart watcher, sometimes it behaves like money and sometimes like a commodity. A conundrum.

For some clarification on this Mick Shedlock has written a great article on this topic, check it out:

Misconceptions about Gold

The obligatory chart shows the August contract caught in this downward sloping channel with little swing trades possible of the declining support and resistance. In the absence of any meaningful trend in the bigger picture, this is my preferred way of playing Gold at the moment.

27 June 2007

Oil Chart Juicing Up

News on Gasoline stock released today:


Oil Tops $68 on Gasoline Supply Concerns
The Associated Press

NEW YORK - Crude oil and gasoline prices rose Wednesday after a government report showed gasoline inventories unexpectedly shrinking last week.

Heating oil prices also increased after a surprising decline in distillate stocks.

Light, sweet crude for August delivery on the New York Mercantile Exchange gained 31 cents to $68.08 a barrel in morning trading. The contract had fallen $1.41 on Tuesday.

Brent crude futures edged up a penny to $70.18 on London's ICE Futures exchange.

Gasoline futures rose less than a half-cent to $2.2515 a barrel.

The Energy Department reported Wednesday that gasoline inventories dropped 700,000 barrels in the week ended June 22, contrary to the 1.1 million gain that had been expected by analysts polled by Dow Jones Newswires. Total gasoline stocks are well below the lower end of average for this time of year.

This news bumped up the price to the upper edge of the little flag shown on the chart.

The obvious point of interest is whether this breaks out tomorrow and has another shot at $70 on the August contract

A Change

Hi Folk, (This is not a typo, there is only one person tenacious enough to check this blog for new posts. That's my wife... and only cause I just told her.)

As intimated in an earlier post, I've been moving in the direction of commodity trading. I've been dabbling in commodities for some time while predominantly trading stock options, but over the last year things have changed. I've become predominantly a commodities trader who dabbles in a few stocks and their options.

There are a few reasons for this which I won't bore you with right now, but mainly I am attracted by the non-correlated returns offered by non-related commodities and financial futures.

You will have also noticed that I've changed the name of the blog. Obviously I wanted to reflect my change of direction, but also to out myself as a bear. (Those that know me know this already) "Trading the Apocalypse" seemed to reflect all the bullshit happening in the world right now. Wars, global warming, terrorism, mortgage fiascos, perpetual bubbles waiting to pop, all point to some "exciting times in the near future. Perhaps an apocalypse? Perhaps not. LOL

So what I want to do here is comment on whats happening in the various markets; of course throw up some charts on the action as well, nothing new there. But maybe I'll have a bit of a vent every now and again, bitch about house prices, make enemies on the other side of the political spectrum (wherever that lies), give out fuckwit awards, stuff like that.

Maybe even a stock of the day once in a while.

Anyway, this is purely for my enjoyment and as an outlet for my frustrations. If you feel like joining in (that is, if anyone apart from my Mrs reads this) please do so.