The Euro needs a rest, this could be the bottom, or not, who knows, but I know that it won’t go straight up like this forever, let it come back in and find support around 1.215.

It’s obvious from the action what is going on in this economy, just look at the charts.  Tech is on fire, the semis are leading this market once again.  The mobile revolution is upon us and the fundamentals all point higher.  Tech isn’t going down hard if Apple which is 16+% of the Nasdaq Composite is rallying like this.  Take a breath, wait for the pull backs, and buy these names.

I still don’t like energy, crude looks like it’s putting in a huge bear flag, look at the decrease in volume as we go higher.  It’s not a trade that I’ll play, but I think we’ll be headed back down towards 68.

Copper has resumed its downtrend, don’t complicate things here, the line in the sand is 2.7 on the $HG_F, below that and the global growth story looks cooked.

What I’m saying here is that we’ve got a mixed market, but there are pockets of growth the be playing on the long side.  I don’t think we are about to fall off a cliff, so wait for your setups, and strike.  Don’t chase the price action, I think we see a very choppy market through the summer and then maybe get some resolution in the fall.

I took a long position in $BRLI today at 23.75, the setup on the weekly and daily charts looks very nice, and the fundamentals with this one are strong.

We closed a penny away from VWAP on the $SPY today, no coincidence.  Today was the epitome of wait and see, traders are playing some serious chicken.  Don’t be the first to move, wait for the winner to appear and join the crowd.  Bulls want to see a slow, methodical strong bid in the market over the next 3 days, not a quick run up that is going to be heavily shorted into.  The longer we churn down here the move bears get trapped, the more fuel to push past the year’s highs and on to 1200 $SPX.

It appears that crude $CL_F has found a short term bottom.  It’s still suspect as the oil market has been unable to hold a bid for more than a few minutes at a time.  The US Dollar has a lot to do with this, we are on the door step of a huge breakout, everyone is in wait and see mode now.  I think there is a playable bounce here in crude with a tight stop under today’s low.  I want to see it climb back above a flat 5 day moving average, I won’t be able to take as much size, but I’ll feel more confident that the bid is back.

Gold $GC_F is in the area where you want to be accumulating it for a longer term position (3 to 6 months), as well are the gold miners.  You’ve got to buy the materials on dips, chasing breakouts has only led to heartbreak.  That said, if $GLD breaks 110.14 I’ll completely reverse my positions and get short gold, that kind of action could be signaling an end to the asset reflation scheme.

Copper $HG_F continues to hold the bid.  It’s showing a very pretty bull flag on the daily chart and continues in its trend.  The Chinese equity markets are struggling, but copper continues, a divergence for sure, I’m not quite sure what to make of it, something to ponder, keep an eye on it.

Grains continue to get destroyed, don’t touch em.  I missed my short entry, I’m not happy about that.  Sugar $SB_F continues to fly, pure momentum there.  I don’t play the sugar futures, too illiquid, along with the $SGG.  One way to play this is through $IPSU and $CZZ which both show nice momentum and patterns.  You take equity risk by playing these names, but it does give you some exposure to the trend.

I’m short the long bond via $TBT.  I hate to use double short products but I couldn’t get a borrow on $TLT and this looks like a trade too obvious not to take.  My stop is above Friday’s high on $TLT, check the trading book for my exact entry and size.

Apple crushed their earnings, although iPod sales were lite.  The tablet, slate, widget, or whatever the hell you want to call it is going to be a game changer, I have no doubt.  That said, I feel that there may be some serious institutional selling in $AAPL this week as retail money pours into the name, giving the fund enough of a bid to distribute their stock.  They’ve made a lot of coin in this name and I think some are itching to take a few dollars off the table.  I’m long, but a little nervous.  I want to see the stock get into clear air above 215 and I’ll stop sweating.  If it goes it may not look back for a hundred points, I’m not kidding.

Have some patience with the materials if you stepped in last week, these aren’t day trades.

I’m off to hockey, second round of playoffs tonight.

The move in crude corresponded to similar moves in the $USDCAD and copper $HG_F.  There was no one to take the other side of those trades the better portion of the day.  The $USDCAD has been especially volatile as it retests an important breakdown level.

Equities where a completely different story.  Financials, housing, and even certain retail names are beginning to roll over.  Commodities are obviously holding this market up as even tech can’t move forward with conviction, one step forward, one step back there.  Once crude had closed there wasn’t much to hold up the market.  Traders took their foot off the sell the $USDX pedal and planned on sitting tight for the remainder of the afternoon.

Then Mr. Dick Bove decided to come out and downgrade $WFC.  Along side that, Obama announced new pay restrictions on government owned banks and car companies.  The market obviously didn’t like one or both of these announcements, and puked.

The market broke support on the $ES_F at 1091.25 and dumped over 2% in an hour.  Whoever wanted out wanted out bad and didn’t care at what price.  Stocks were sold across the board with the finnies taking the brunt of it.

I sold out of $AMZN today, took a long position in $APWR, and a short position in $JACK.  In the spirit of @howardlindzon I plan to walk into a Jack In the Box restaurant tomorrow, puke, and claim the burger has H1N1.

]]> http://www.leighdrogen.com/straight-lines-postmarket-update/feed/ 0 http://www.leighdrogen.com/gold-and-crude-oil/ http://www.leighdrogen.com/gold-and-crude-oil/#comments Sun, 04 Oct 2009 23:39:08 +0000 Leigh Drogen http://leighdrogen.com/?p=671 I’m still working out a few kinks in the new site, this weekend I’ve experienced a little issue with links.  Due to this issue I wasn’t able to write the weekend reading post this week.  Instead, I wanted to spend a few minutes tonight looking at weekly charts of both gold and crude oil.

The fact that gold has put in an inverse head and shoulders pattern over the past year and a half is undebatable.  The range from the March 08′ high of 1029 to the October 08′ low of 692 is $337.  This pattern though is not complete until the neckline at 1029 has been broken to the upside.  The measured move out of this pattern would bring us to 1366, how long that takes is anyone’s guess.  Here are a few things over the next three months or so.  If and when gold is able to break past 1029, watch the volume on both the $GLD and $GC_F closely.  Large volume on the breakout will be key in confirming the fulfillment of this pattern.  I will expect to see $1100 quickly as momentum players pile on.  Look for gains by short term players to be booked at that point, leading to a retest of the neckline at $1030.  This test will be very important as it will determine whether the breakout level will now show significant long term support.  Long term players will watch closely here for support, if it holds I can see them piling in big time.  If support doesn’t hold, things could get ugly for gold quickly.  From failed moves come fast moves, this is true on all time frames.

Let’s put on our macro thinking caps for a second.  Gold isn’t going to $1300 in a vacuum, this move will either be in reaction to the movement of other assets or in conjunction with them.  The US Dollar Index currently sits at 77, six and a half points from its most recent bottom of 70.5 back in March of 2008.  Could the US Dollar retest this level, sure.  I can see a major break in the dollar as being the catalyst for the expected surge in gold.  I can also see the dollar and gold move up at the same time in the event of the “fear trade” being put back on.  We saw this between January and March of 2009 when the second round of deleveraging took place in the market, slaughtering equities and commodities alike.  Investors unwound carry trades in the US Dollar sending it surging, and bought gold as a last ditch end of the world safety play.  This was an extraordinary moment in the market’s history where both the dollar and gold rallied simultaneously in the face of what many believed was a deflationary spiral.  Could this happen again?  Although odds would not favor a repeat of the “fear trade” being put back on, we must keep out minds open to all possibilities.

Crude oil also sits at a very focal point between 65 and 75 dollars.  Crude is running into major resistance here as it tests the highs put in during the summer of 2006.  This level also happens to be the 38.2% fib retracement off  the 2008 highs.  The air above 75 in crude is clean to the 85 level where it runs into resistance to 100.  Above there and there is nothing technically stopping crude from making another run at 145.

The more likely scenario I see is a long consolidation period where crude trades between 50 and 75.  I believe the fundamental players are willing to sell crude up around 75 given the underlying weakness in the global economy.  This will change long term as China’s thirst for crude expands regardless of global economic health pushing crude back towards 145 and above.

The real action today was in crude which broke a significant trend line and is now sitting right on the flat 20 day moving average.  I get the feeling that we are in nosebleed territory for crude above 70.  That being said, because of the pure momentum characteristics of commodities, I see no reason why we can’t break through 75 and run to 100 if the dollar takes another leg down.  The bulls are very cautious though which is evident from the sharp pullbacks we’ve seen lately.  I don’t think there is anyone around to go short CL_F for fear of the weak dollar, at the same time, I don’t think there are any fundamental players buying crude up here, the momentum guys are the only ones playing.

I was stopped out of my position in USL today, which is unfortunate because I believe the dollar will capitulate at at some point and we will go to 100.  I will take this trade again if we break the yearly highs in the October or November CL_F contracts.

A few little notes. I wish the sugar ETF SGG was more liquid back in June when it gave a great buy signal.  The run there has been amazing and perfect and amazing and amazing and you get the point.  It would be very hard to dip into that trade now, but man is the momentum there.  Also, copper got slammed today.  I won’t speculate as to why copper has been on a tear this year, frankly I don’t care.  What I do care about is what seems to be a correlation between the Chinese markets and copper prices.  Keep a close eye on that one.

There really isn’t much more to say, it was one of those days when watching grass grow was more exciting than the market, and without a better feel for where we go next, there is no point in putting on any more positions.

Watch out for the release of StockTwits Desktop tonight at midnight.  This platform is amazing and will blow your mind.