These Commodities Are Starting To Look Tradable Again
Monday, December 15, 2008
by Lee Lowell, Futures Options & Commodities Specialist, Smart Profits Report
In my last column on December 1, the price of crude oil had just slid under the $50 a barrel level – and over the past couple of weeks, the action has continued to be anything but boring.
We’ve seen the price drift down just shy of the $40 mark – a level we haven’t seen on a front-month futures contract since December 2004.
To illustrate how fast the market is moving these days, we saw a very brief bounce back to $50 earlier today before the gooey stuff fell right back down to $45.
Now that’s what I call some good, old-fashioned intraday volatility.
I don’t know about you, but I’ve noticed that the price of gasoline at my local station has shifted more than usual on an intraday basis, too.
But if the OPEC oil cartel has its way, we could see oil climb more forcefully again. The ministers have already promised to “shock” the market with a supply cut when they meet on Wednesday. I think anything under a two million barrel per day cut will be seen as bearish for the market.
Natural Gas Edges Closer To A Prime Bullish Level
Natural gas prices have made another move lower, finally falling under the $6 per MMBtu level to its current level of approximately $5.650 per MMBtu. We’re looking for natural gas prices to get down to the key $5 per MMBtu level.
Why? Because the $4.500 to $5.000 per MMBtu area has proven to be a solid support level for the past six years. The last time prices traded under $4.500 per MMBtu on a consistent basis was in early 2002. If it does so again, this is the price at which we could consider a bullish trade.
Has Logic Returned To The Precious Metals Market?
At last! The old theory of precious metals being in high demand during times of economic turmoil might finally be coming back into play.
It seems that gold and silver have washed out all the weak bullish speculators, with both metals enjoying decent technical bounces and possibly regaining some upside momentum.
Gold has already made solid upside moves over the last two weeks and silver looks like it might be able to break out of the narrow trading channel that has trapped it for the past two months.
Keep an eye on these because if the world markets continue with their downtrends, these metals could be the only bullish things around.
But hold on a second…
Grains Looking Good
Over in the grains world, we’ve seen some good upside action over the past week, with corn, wheat, and soybeans all beginning to look up.
Check out their charts here:
CORN: http://futuresource.quote.com/charts/charts.jsp?s=ZC%20H9
WHEAT: http://futuresource.quote.com/charts/charts.jsp?s=ZW%20H9
SOYBEANS: http://futuresource.quote.com/charts/charts.jsp?s=ZS%20F9
Along with the rest of the commodity sectors, these markets topped out in July after making new all-time highs and have been mired in stubborn downtrends ever since.
It may be too early to tell if these markets have finished with their downmoves as historically speaking, prices are apt to trend lower from this time forward until springtime, since most of the harvests have been concluded. But while we may see grains drift south just a little bit longer, we might have seen the last of the 2008 lows at this point.
Cotton Looks Tempting, But We’re Going To Hold Off A Little While Longer
As I’ve mentioned a few times in recent weeks, the cotton market was trending down towards its all-time low price of $0.28 per pound, which it set in 2001 (based on information spanning back to 1979). So with that possibility still in sight, I’m keeping a close watch on it.
The current front-month futures contract (March 2009) dipped under the $0.40 per pound level on November 20 and has since turned higher to its current level of $0.44 per pound.
In my opinion, it’s starting to coil itself into tighter trading ranges and when it finally blasts out, you can expect it do so with gusto. We just need to wait and see what direction it will break to.
Until next time… good trading.
Lee Lowell