Sunday, December 19, 2010

CTS Spotlight for the week of December 17th, 2010

Hello and welcome back to CRI's CTS Spotlight

12/17/10: As has been the case for a few weeks now, money is once again flowing back into the US dollar. The stabilization comes on both better economic news from North America and worsening debt concerns in Europe. Stop gap measures won't fix structural problems, the only resolution is a meaningful fall in the Euro. (making investment in Ireland, Spain, Portugal, Greece, etc. relatively attractive again). What CRI finds so interesting here is that know one is commenting on how well Germany (and specifically German companies) is doing. Those members who are profitable at these levels have seen their markets boom higher. Speaking of booming, equities continue to zoom higher with every index followed trending up. The recent tax compromise out of Washington, coupled with QE2 has both relieved the market of potential selling pressure and once again put a bid in stocks. This weeks CTS Spotlight looks at the professor of economics (HG Copper) and what he is saying, should make for an interesting read.

HG Copper
This week we shall look at Copper from a rational perspective to see if the recent price action makes sense given the current fundamental and technical pictures. 

Economic indicator:
Copper itself is considered an excellent barometer for economic output and has thus been given the title of 'Professor of Economics' in the marketplace. If copper prices are trending higher, odds are it means someone, somewhere is buying. In most cases too, buying means building, which of course is another way of expressing economic activity. Yes there have been cases of market manipulation (Haminaka of Sumitomo Bank was the last to try back in the '90s) but by in large, a upwardly trending copper market is a hallmark of economic growth. According to CRI's most recent CTS, Copper has been trending higher now for 99 weeks (or a little under 2 years) with the most recent weekly 'buy' signal being issued at $4.08 just a week ago.

Fundamentals
While traveling through Transport Canada's offices here in Vancouver recently, I overheard a cute anecdote that I think summarized what is going on in commodity land of late. One bureaucrat scoffed at another, "last year it was airports, this year its rail". He was referring to China, of course, and the ferocious build-out of its economy. That got me thinking, what are some of the most basic necessities of building rail networks? Steel (for the rails), Copper (for the electrical wiring) and Concrete (for the buildings) were three thoughts that came to mind. So one would logically conclude that if this were indeed the case we would see huge draw-downs in the world's supply of these (along with many other) commodities. With this in mind, below is a chart of warehouse stock piles of Copper as reported through the London Metals Exchange (LME). Indeed, stocks have been dropping, confirming our thesis. Since we know Austerity programs have nearly halted development projects in Europe and North America is still treading water, the only region to be able to buy in this kind of size is Asia. One additional piece to the fundamental picture, there is word out of late that there is going to be a an ETF (Exchange Traded Fund) floated for Copper. In recent years Gold and Silver ETF's have been floated and the demand was very strong. Considering where we are in the 35 year 'fear-greed' cycle, I wouldn't be surprised to see a lot of demand for a Copper ETF. With this in mind, one could argue that the lack of demand from the industrial side here in North America could be replaced with investment demand from the ETF community.



Technical
Warehouse stock analysis
A closing note on the chart above, the drop in warehouse stocks over the past year has been so dramatic (by almost half!) that a 50% correction of this move does seem likely. While there is no 'bottom' in stocks yet, should a double bottom come in over the coming weeks, a rally into the 45,000 area shouldn't be unexpected.

Price chart analysis


Listed above are the short term and medium term monthly price charts for Copper traded on the COMX. Since we can all agree that prices are moving higher in the short term (daily & weekly pointing higher) I thought we would take a look at the market from a little longer term perspective to see where we may be going over the coming weeks and/or months. 

The first thing that jumps out at me is that one should definitely be LONG this market from the monthly breakout at or near $3.68. This breakout corresponds with the broader market buy signal (Please refer to CRI's S&P 500 Blog for more on this) that was generated through the month of September as the market got news of both a change in the US Federal Political landscape and of a further US Federal Reserve Board Stimulus spending package. The breakout also confirms a massive bullish flagpole formation which suggests prices want to ultimately get up into the $5.00 area! While I think that target is still a ways down the road (maybe on the day of the IPO of the ETF), the fundamentals do suggest there is enough demand. In the near term, the top of the trend channels (for both the two year trend and the 5 year trend) seems to collide at or near the $4.50 area. As well, the current weekly price target for CRI's most recent CTS is also in the $4.50 area [Bull flag; (4.084-3.178)+3.606].

If you are in the trade from $3.68 then give yourself a big pat on the back. You played the breakout and it was spot on. There is no doubt about it, this market is 'going parabolic' so you may see that $4.50 target hit in the next week or two. CRI's CTS was given a new entry at $4.08 (on the move to new highs) but please keep in mind, this is a very speculative trade, not an investment quality signal at all. The low volume holiday atmosphere might just what the pros need to play with the charts.

Here is the tricky part - stops on this Monthly breakout trade should STILL be just under support at/near $2.72 (because it has been a straight line move up). This means one can realistically expect a $.43 correction at any given time. I wouldn't be surprised to see that exact thing happen after the first week of January with the market ultimately bottoming in mid February. My hunch is we will probably trade back down into the mid $3.00 area since that would be close to the monthly up-trend line (chart on left). As well, a 50% retracement of the recent rally would bring price back to $3.47 [($4.225 + $2.77)/2 = $3.4745]. Once we get a pullback (and then a subsequent move to new highs) we will have a new support level to move our stops to but that may be weeks if not a couple months down the road. If you missed the trade DO NOT go a buy this market now. Wait for a correction and then look to enter because heading into the spring, this looks extremely bullish. But, of course, CRI will be more than happy to let you know when we are pulling the proverbial buy trigger once again...


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, December 12, 2010

CTS Spotlight for the week of December 10th, 2010

Hello and welcome back to CRI's CTS Spotlight



12/10/10: The US dollar continues to consolidate its recent gains. Because of this, we appear to be stuck in a bit of a holding pattern within many commodity markets. Is the US dollar bottom for real? It's too early to tell but I'll have to admit, from Coffee to Aussie dollars to Swiss Francs, there are quite a few markets setting up for a trade - you can literally see it coming. Having said that, the market does have a lot of steam behind it so I won't be looking for a breakdown until at least the new year. In this week's CTS Spotlight we shall look at one of the few markets not to rally in 2010, Cocoa, and how that may be about to change.

Cocoa:
With all the news in commodity land of late, one is always hoping to grab the next big move. The recent bullish action in Cocoa prices, coupled with political turmoil in The Ivory Coast (where almost 80% of all cocoa supplies come from) had me thinking that a big move might be coming. Then we look at the charts and we come back down to earth.

While Cocoa prices have done virtually nothing for 2010 (which is one reason I thought we might have a long trade here), price have moved steadily higher over the past decade. Indeed, so much so that when one looks at the monthly price chart (on right above) one can clearly see that even the most aggressive price targets have all been hit. We can also see that 'real' support for Cocoa prices actually sits near the 20 area not the current 30 area. Supporting this argument, a very simple 50% retracment of the 2000's bull market would bring prices back into the 21 area [(8+35)/2 = 21.5].

From a shorter time frame (weekly on left above) we see that Cocoa prices are actually working a very clear bearish flag pole formation. The formation has taken almost a year and a half to play out. It was confirmed when prices broke through last January's lows (just under 28) in July. Because of this, one ought to be reluctant to get too bullish until this pattern has played itself out. The target here is near 24 which would coincidentally bring prices back to the 5 year Monthly trend line.

So, while I would love to report CRI had found another great market to get into, this just isn't the case. I will be watching Cocoa as it nears the 24 to 25 area as we may get a trade-able bottom at that point. But for now, a big nothing....

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

p.s. Swiss Franc has rallied into topping zone mentioned a few weeks ago in CTS Spotlight. CRI will be looking closely at the June puts and may issue a CRI OnlyDoubles NewTrade Alert...

Sunday, November 28, 2010

CTS Spotlight for the week of November 26th, 2010

Hello and welcome back to CRI's CTS Spotlight


11/26/10: The US dollar continues its' counter trend rally as growing fear over European debt problems and the very real threat of war has sent the market scrambling. Contrary to this, growth prospects for North America are looking better with every passing day. Yields are starting to move higher which has given int'l investors a reason to own American. This 'perfect storm' of pro-America/anti-international could lead to a BIG MOVE. If the bullets start flying in earnest there will may be a massive move into the US dollar as traders 'wait-it-out' in still the world's only true reserve currency. Couple this with European default fears and it makes for a not so fundamentally sound int'l market. On a brighter note, two areas that continue to look good are meat and energy. We looked at Cattle last week in CTS Spotlight and this week we shall look at some of the energies. 

Energies
This is one area of the commodities market that has not been in the spotlight for some time. In fact, while the grains and metals have gone parabolic over the past few months, there has been a relatively quite stealth bull market going on in crude in particular and energy price in general (with the one exception being Natural Gas). This stealth rally seams to be well entrenched and based on sound fundamentals. Inventories have been steadily declining while the economy is slowly improving. Couple the resurgent US economy with a forecast for a much colder North American winter and it is not surprising to see that this sector has been steadily moving higher of late. Should prices move in the fashion of other commodities rallies of late, we may see energy prices move back into the center spotlight. 

Ironically enough, the Fed's injection of $600 billion dollars into the economy over the coming quarter may be entirely gobbled up by rising energy costs. Not only will the rise counter act the Fed's injection but it will further enrich the Arab nations at the direct cost to US taxpayers.......you just can't write better fiction than reality.

Regular readers of CRI publication should be well aware of the Uranium bull market underway. OnlyDoubles's NewTrades subscribers have enjoyed several doubles over the past month as the junior Uranium sector has come alive on ridiculously low stock valuations coupled with increased demand news from China.

Looks like unleaded-gas prices are going back up.....ugh!

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, November 21, 2010

CTS Spotlight for the week of November 19th, 2010

Hello and welcome back to CRI's CTS Spotlight

11/19/10: In a week that saw the US Fed Chairman defend his US domestic policy focused agenda (which should be the case) the long end of the yield curve has begun to rise appreciably. The US Fed's QE2 program is doing exactly what Mr. Bernanke desired in that the curve is steepening, money is starting to leave 'safe-havens' (in particular the Swiss franc) and one can't help but get the impression the general economic situation in North America is improving. While still a bit above my desired target, the US dollar has taken out the 'stops' (most recent resistance) suggesting the torrent of US dollar selling may be waning. As well, Money does seem to be leaving 'hard' assets and moving into 'soft' ones again. Enjoy the run while it lasts as this may be a trap. I say this now because as of last week all the equity markets that CRI follows are pointing higher. Not a signal in itself (when this happens) it is often a contrarian sign of the end of a sector's move. In other commodity markets, grains prices look 'toppy' while beef prices look strong. In our CTS Spotlight we look at a few of these markets and where prices may be headed.


Grains/Meats

1. Grains: The 2010 North American growing season was dominated by news of a European grain crisis (specifically Russian wild fires and talk of export bans). Most interesting here, wheat prices (upper right) have not moved higher since the initial news of export sales bans out of Russia. In fact, one could argue prices will have a very hard time moving higher in the coming years if the current triple top isn't broken soon. Prices just this week broke back below support and are now pointing substantially lower. The weakness in wheat prices is starting to have a negative impact on other grains. Oat prices (upper left) have put in a nice tight double top and are testing the up trend line. Should this fail there is plenty of room for prices to fall. Aside from regular 50% retracemnents, Oats have lots of gaps to fill in. Should the selling get going in earnest, price could easily see the lows of last spring again.


2. Meats: The recent win by the Republican's in the mid-term US congressional elections was a boost for American Cattle producers in that their collective voice will be heard much more if and when the Republican's are in charge of Congress. CRI has been suggesting beef prices want to go higher for some time (even did an OnlyDoubles trade last spring being long Feeder Cattle). While prices in Feeder's are way too volatile to take a position, any consolidation might represent a potential entry. Live Cattle on the other hand is currently sitting within 1.5 points of its breakout and might represent a nice entry. Should grain prices indeed top here, one could easily see meat prices move higher as both upside technical targets exist and beef prices in general have underperformed other commodity prices appreciation over the past ten years.

That steak you like so much is gonna get a bit more expensive :(
That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, November 14, 2010

CTS Spotlight for the week of November 12th, 2010

Hello and welcome back to CRI's CTS Spotlight

11/12/10: In a week that saw little change to most commodity trends, the US dollar bounced enough to trigger some aggressive stops. While we are still a bit above our downside target for the dollar index, one can't help but get the feeling a dollar rally/commodity sell-off is very close. Additionally, we have been looking for the market to rally into the US mid-term congressional elections and we got it. Now that the event has come and gone, a period of consolidation shouldn't be too unexpected. Interestingly, Japanese stocks have bottomed and now join the rest of the world's equity indexes in rally mode. This is probably because Japanese exporters see a US dollar bottom/Yen top coming. However, the fact that all world stock indexes are moving higher (in unison) suggests the equity bull run is very near an end.  

Japanese Stocks (Yen vs. Dollar) 
A few weeks ago CRI examined the Japanese Yen and suggested we were in the late stages of a Yen rally/US Dollar sell-off. So much so that and one ought to consider taking the other side of the trade when it eventually reverses. While the Yen's price action isn't quite bearish yet, there are a few signs that the Yen Bull might be loosing steam.
If one looks at stocks as a harbinger of growth to come, then one must clearly get the message that the world economy is expanding once again (S&P 500 hit new 52 week high last week). From Europe to the Americas to Asia, growth is once again quite alive. It is interesting to see that while the US economy was faltering, money was moving in earnest into the Japanese Yen. This 'flight-to-safety' not only pushed to Yen to multi-year highs vs. the dollar but it also destroyed any profits Japanese exporters enjoyed while selling their product into the US market. Now that the US economy (and with it the primary world growth engine) seems to be back on-line, one can clearly get the feeling money is starting to move back into the US. As well as the dollar index breaking its most recent resistance point (and associated stop level at 78.364) the Japanese stock market has finally put in a respectable bottom. Additionally (as CRI has pointed out over the past few weeks) bond prices are breaking down (and inversely interest rates are going up). 

So if one puts all of this together, it would seem rather clear that the US Fed's policy (flooding the market with liquidity until the US economy regained some traction) has worked. The Fed's finesse of the yield curve has induced a steepening of the curve. Long bonds are topping and equities are moving higher on this.
 
Now for the problem: Almost every time I have seen ALL the world equities rallying at the same time, we are very close to a top. The fact that Japan wasn't participating was actually good as we here in North America could quietly move higher (under the proverbial radar screen). This is no longer the case as the public is starting to pay attention to the euphoric moves higher in stocks. Unfortunately both rising interest rates and already high commodity prices shall act as a break on too much more of the equity rally......

So enjoy the rally while it lasts and understand that we are getting very late in this world economic expansion so much so that even markets that shouldn't be going up are starting to...

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, November 7, 2010

CTS Spotlight for the week of November 05th, 2010

Hello and welcome back to CRI's CTS Spotlight

11/05/10: In a week that saw both US mid-term Congressional elections and the US FOMC meeting (among other important trading events) the markets has taken a decidedly bullish stance heading out of the events. The market got what it wanted; both a market friendly Republican controlled US House of Representatives (which ought to put a break on out-of-control Democrat spending) and an additional guarantee of $600 billion in bond purchases by the Fed....let the party resume! We shall examine the Fed's plan and how the charts look in this weeks' CTS blog spotlight so be sure the check that out. Interestingly, Japan's equity index has finally started to move a bit higher. Should this market start to rally in earnest we will know indeed the end of the run is close at hand.

US Bond market - Fed action

In its recently released minutes to the Early November FOMC meeting, the Fed said they are prepaired to inject another $600 billion dollars into the US economy through bond purchases. Specifically, they said they will be targeting the 2 to 5 year US government bonds in an attempt to both steepen the yield curve and 'jump start' the US economy. This week then I thought as a follow up to last weeks' European Bond charts, we would look at the US bond market, which durations are moving and what the yield curve looks like now.

(Please refer to charts above)

Interestingly, the US 30 year bond is NOT participating in the latest bond market rally. Is this what the Fed wants? Notice too that the 10 year bond is starting to roll over. Since we now know there will be another 600 billion in Fed purchased, it is not surpriseing to see both the 5 year and 2 year markets moving to new highs. So then what does this action do to the yield curve?


Here is a current graphical representation of the US government yield curve. Notice how steep it is? This is a healthy growing economy and it is no surprise that the stock market is happy and moving higher. The US government is giving the public a $600 billion check and the market is putting it to work. The problem (if  and when comes) will be when the curve inverts (this is where short term rates are higher than long term rates and is a very good tool at timing recessions). This simply is not the case currently.

Conclusion: The Fed is getting what it wants, the economy is slowly turning....lets hope they know what they are doing.
(oh and by the way.....I have total confidence they DO NOT but enjoy the flood of liquidity while it lasts)


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, October 31, 2010

CTS Spotlight for the week of October 29th, 2010

Hello and welcome back to CRI's CTS Spotlight


10/29/10: We have finally made it to the US mid-term congressional elections (to be held this coming Tues. Nov. 2nd). The market has priced in a Rep. party victory in the House, the question now remains will they take the Senate too. Stocks are generally happy (with the notable exception of Japan) and look to continue their recent rally. Commodities in general are strong and until we see a discernible bottom in the dollar, that trend has no reason to abate. It has been quite a run since Aug. (for example, CRI's OnlyDoubles has had 3 doubles in the month of October alone!) but there are early warning signs of the end of this Euphoria. CRI's DI index is looking very toppy and bond markets in Europe have started to break down (please refer to this week's CTS Spotlight). Should the US Fed's 'shock & awe' quantitative easing indeed work, then one might expect to see serious deterioration in bond prices which will then ultimately lead to a deterioration in equities. We are not at that stage yet, so enjoy the top of the market while it lasts.

European Interest Rates:

While growth within the US is still in question, there are clear signs that the bond market is starting to price growth back into the equation in other parts of the world. Specifically today, we look at two big European issuers of debt - Germany and Britan. Both bond markets are clearly in long term bull markets (lower charts) but there are signs of the bears taking control in the short/medium term (upper charts). 50% retracements will bring both markets back into long term support areas so those fixed income investors out there, be patient and wait for yields to raise a little more before locking in.

Historically low 10 year US treasuries?


Every once is a while I like to look at really long term charts just to put where we currently are in historical context. Here then is a 200 year chart of US Treasury yields from back in 2002. The most recent chart hasn't changed that much other than yields are still falling. 
 
While one can draw many different conclusions about government yields and the development of a country, there are some basic ideas we can take away from the long term trends.
1. The combination of the 'baby-boomer' generational influences coupled with a peak in world socialism pushed inflationary pressures and thus yields to historically anomalous levels. 
2. The simultaneous unwinding of both of these significant market forces may bring the market right back to where it started. Baby-boomers's demand for hard/fixed-income assets shall dominate while current 'emerging market' politics/economics have all but crushed the gains of the international socialist movement. Trade union, what trade union?

The more things change....the more they stay exactly the same....


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com 

Sunday, October 24, 2010

CTS Spotlight for the week of October 22nd, 2010

Hello and welcome back to CRI's CTS Spotlight


10/22/10: In a week that saw the US dollar bounce, many if not most commodities took a breather from the torrid pace that has been set over the past few weeks. Considering the significant fundamental event on the horizon, it should be of no surprise to see a proverbial 'calm before the storm'. Interestingly, only the Nikkie still remains bearishly pointing. My hunch, once Japan's stock market starts pointing higher (and thus making every stock index followed bullish) we will know that the equity rally has almost come to an end. That hasn't happened yet so enjoy the mini-bull in your neck of the woods while it lasts. Of particular note this week, Live Cattle and Wheat are starting to show signs of reversing, is this the beginning of the end for the grain rally? 

Wheat & Live Cattle

The late summer saw a dramatic rise in the price of grains. Wheat for example, moved from a low of $4.5/bushel to almost $8/bushel in less than three months. But that bullishness seems to have evaporated for the time being. Indeed, Wheat prices began to break down three weeks ago when prices traded back below 647. CTS now has a short trading pattern working (where one ought to be short from that 646 area with corresponding stops just above the recent highs at or near 7.535). The 50% level for wheat currently sits near 607 for a profit potential of 40 points ($2000/contract). While CRI doesn't have a position here, CRI still expects this market to continue to correct into the harvest. Once the 50% level has been reached the next technical objective shall be to gap at $4.9 area; but we will cross that bridge when we come to it.


Live Cattle


Quit conversely, Cattle prices spent the summer going sideways and have only now started to break out in earnest. The move this past week through the significant resistance at 1.00 has cleared the way for Live Cattle prices to move into the $1.10 area if not higher. This is a classic bull flag formation and one of the easiest patterns to trade. One should be long from the breakout (at or near 100.2) with corresponding stops below recent support (in this case I would be thinking 94.50 area). The target is straight forward in that one takes the flag pole distance (in this case 100.2 minus 78.7) and adds that number to the bottom of the consolidation (in this case 87.9). One could even have an open order to sell (once you have been confirmed on your buy!) sitting at $109.3. These price patterns can move very quickly so if you missed it...don't chase it!


Summary


The fact that Wheat and Cattle have price inverse price patterns working suggests to me there is money moving in the market. Considering the time of year (specifically the seasonal tendency for farmers to bring their harvested crops to market) I think there is validity to these breakouts. 

At all times one must ask, 'is the trade worth doing?' And unfortunately in both cases, there just isn't enough of a profit margin to justify taking the risk. In wheat's case there is 40 points of profit for over 100 points of risk. In Live Cattle's case the original trade [long from 100.2, with stops just below 94.5] would have had 9 points of profit for 5 points of risk but now that the market is at 102, this trade now has 7 points of profit for 7 points of risk. 


Here then is a case of understanding where the market is going but not doing the trade. Since we have a limited amount of capital to work with (and we really don't want to loose too much if we are wrong) we have to be constantly deciding if a trade is worth the risk. One simple formula CRI uses to judge if a trade is worth taking the risk on:

Option eligible: 
If a six month option's strike price - your target price is twice the current offer for that option
Non-option eligible stock:
If your target price is twice the current market price AND your risk is less than 50%.
penny stock note: CRI tries to buy stocks that have been recently rolled back (please refer to CRI's Venture Cap Inv Model for more on this) and take a 100% risk on the trade.  This approach could only be contemplated understanding that any single trade NEVER represents more than 5% of total assets of a portfolio.

We traders spend a lot of our time just watching and here I think is a great example of just sitting patiently on the sidelines and enjoying the scenery...


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, October 17, 2010

CTS Spotlight for the week of October 15th, 2010

Hello and welcome back to CRI's CTS Spotlight



10/15/10: The British Pound has joined the bull camp as it too has begun to appreciate in earnest vs. The US dollar. Amid this orgy of dollar selling many commodity prices have hit upside objectives (please refer to this weeks CTS spotlight: Silver for more) so please take some profits and be careful. Having said that, there is still further to go to hit our US dollar bearish target and there doesn't seem to be any impetus to halt its decline until after the November elections and maybe even into early January. The Canadian stock market (an excellent barometer for commodity related stocks) has confirmed its bullish breakout of last week suggesting that commodities and commodity related stocks are still very much in the spotlight. Enjoy the rally, check out CRI's latest OnlyDoubles trading opportunities and again, please take some profits along the way...

Silver

Regular reader of CTS and CRI's other publications will recall how bullish we got of Silver last spring. Indeed, CTS has pointed out how the Silver market has been trending higher now for more than 21 weeks and most importantly, our upside target in the $24.00 area has been hit!

If you refer to the chart above you will see a very basic yet extremely powerful chart pattern explained. As the A-B-C-D pattern suggests, if the market can break the top of the flag pole formation (in this case it was just under $20 - Point B) one can feel quite confident that the market will move towards the upper channel line (in this case near $24 - Point D).

Readers will also remember CRI suggesting one ought to accumulate Silver Call options last May, when prices briefly broke through the previous high (at $19.50). Specifically, CRI suggested investors ought to take a good look at the January, 2011 $18 calls that at the time were trading at $1.75. Currently, those options are roughly $6.00 or 250% higher. Indeed, it seems quite logical for those that did participate in the trade to take some profits (smells like another OnlyDoubles trade to me).

For those that did not do the trade, forget about Silver for the time being!

Too often I find that people get most interested in a market AFTER THE MOVE. As the chart clearly demonstrates, buying now is just asking for trouble and yet it is now that the public is getting interested in investing again.....ugh!

Instead, maybe it would be a good idea to subscribe to CRI's OnlyDoubles Monthly subscription service and learn about what markets CRI expects to double going forward...

just a shameless plug......

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, October 10, 2010

CTS Spotlight for the week of October 08th, 2010

Hello and welcome back to CRI's CTS Spotlight



10/08/10: As the US dollar works its way towards to latest downside target, almost every commodity price (which happen to be quoted in US dollars) has moved in earnest the other way. The notable exception being the meat market (which as a negatively correlated market to the grains is understandably weak). It is interesting to both see and literally feel the bullish euphoria in commodity land of late. Not surprisingly, The Canadian stock market as a whole look quite bullish (and is the focus of this week's CTS spotlight). My contrarian concern should not surprise regular readers - as I am quite convinced this is a mini-bubble in nature and shall reverse come late November if not into early 2011. Enjoy the ride while it lasts and lets all make some money!

Canadian Stock Market - TSX 60

With the dramatic increase in Canadian rich commodity prices of late, it should be of no surprise to see Canadian stocks in general on an upward trajectory. Since a good portion of the index is commodity related, prices for Canadian companies will trend in the direction of the underlying. I believe there is a unique opportunity of late in Canadian stocks because of our under performing currency from two perspectives.
1. Companies selling assets into the US commodity market are getting an artificially high commodity price (relive to their base currency) which may represent a windfall gain vs. farmer or miners in Australia for example.
2. Since we live in a truly global world, an international firm shopping for such assets may compare various companies across the globe in an effort to both maximize shareholder value and get a good deal. In short, Canadian companies are relatively cheap in comparison to other country's companies.

I believe its just a question of time until the Canadian dollar once again resumes its upward march vs. the US dollar. It may be because of exactly the reasons stated above, or something completely different. Regardless, the fundamentals do point higher for commodity rich Canada but lets look at the technicals to see if they confirm our underlying bullishness.

Above is the chart for the TSX-60 stock index (Canada's index for its largest 60 stocks and very similar to something like the OEX - S&P 100 in the US).

The Bullish case: Notice the higher highs and higher lows of late. This suggests that indeed this market is moving higher and one ought to expect higher prices generally going forward. Specifically, one ought to be long from 721.2 with your stop below recent support at 645.5. The 575 pivot point represents both the high from late '08 and the low of the spring '09. If we draw a flag pole formation off these points [(721.2-575)+645.5] we come up with a target of 791.7. Coincidentally, there exists a small gap on the weekly chart that will at some point be filled at 822. If I put these two numbers together I come up with a target window between 791-822 for this rally (or between 8-15% higher from here).

The Bearish case: Notice the bearish momentum divergence in the MACD. This latest rally is NOT on momentum and traders should be well aware that unless we move higher in earnest (so much so that we break the spring momentum peak) this may be the last gasp in an a classic bear market dead-cat-bounce. Currently yhe weekly 50% level is at 585.6 [(721.2+450)/2] (or 20% lower from here).

Conclusions: There is fundamental justification for higher Canadian corporate earnings due to rising commodity prices. As well, Canadian corporations are currently on discount for international shoppers due to an under performing currency. There are no sell signals working currently so one ought to be either long or flat. There is currently a buy pattern confirmed this past week from 721.2 with suggested stops just below 646.5. If long, understand we are getting very late in this rally and this latest move higher is not on higher momentum. Understand too that the public is often most euphoric at the end of moves not the beginning. Enjoy the rally and be sure to sell into your targets.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, September 26, 2010

CTS Spotlight for the week of September 24th, 2010

Hello and welcome back to CRI's CTS Spotlight



09/24/10: The US Dollar Index has broken down in earnest as the Euro has finally bottomed. Stocks and commodities are moving higher aggressively within the vacuum that seems to be persisting ahead of the mid-term US congressional elections expected this November. In a similar fashion to the 2008 elections the market is moving into the event. Unfortunately this may mean that once the event has happened many of the currently trending markets may reverse. Having said that, 'make hay while the sun is shining' seems an appropriate stance. Grains, metals and softs are all moving higher so enjoy the ride while it lasts or just be short the US dollar index. Either way, there is money to be made.

US Dollar Index

The US dollar index has been in a significant trend channel between the Bush lows (70.80 fr March 2008) and the Obama reaction highs (89.71 March 2009) for the past three years. Typically Democrat US governments are US dollar bullish. Indeed, since the transition the US dollar has done better. The problem for the bulls, we are currently within a 17.5 year US dollar bear cycle in which we are about 10 years in. This means we should be expecting the US dollar to be heading lower for at least another 5 years but probably closer to 7.

Given the fact that the Republicans are threatening to take back control of Congress this November, it shouldn't surprise to see the market price that potential event into the marketplace. If the currently weekly breakdown is indeed correct, one ought to expect this tentative uptrend line (refer to monthly chart on right) to be tested in earnest.

From a global growth perspective, If the world is feeling like the credit crunch of just a few years ago is over, then one can make the argument for stronger world currencies vs. the greenback and higher commodity prices (which would be exacerbated by a falling US dollar as well).

Regardless of your macro perspective one should either be long commodities or short the US dollar on this major breakdown. The metals have been pointing higher for some time here. Similarly, grain prices and soft prices are moving higher in earnest as well. Lastly, stocks themselves are pointing higher too. There is a lot to choose from so enjoy the rally while it lasts.

Once on the other side of the election.....all bets are off!!!

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, September 19, 2010

CTS Spotlight for the week of September 10th, 2010

Hello and welcome back to CRI's CTS Spotlight



09/17/10: While the currencies of the world hang in limbo ahead of the upcoming US congressional elections, the world stock markets are slowly working higher (this week saw the S&P 500 breakout) amid a world that is convinced rates are going to stay low for some while yet. Commodity prices are rising generally too with notable bullishness in the grains and metals. Regardless of the price action, I would be very reluctant to put on any new money of significance ahead of the November elections. Having said that, a coat-tail trade into the election isn't a bad idea but that is all that it should be seen as and nothing more. Gold looks especially appealing with its recent breakout through $1250. A move over the next couple weeks into the low $1400s wouldn't be a big surprise as it has been our target for 18 weeks now.

As per the most recent S&P 500 blog entry and previous posts here, many of the world's stock markets are moving higher. So much so that double bottoms have been regeistered and upside targets identified.

While I am cautiously optimistic for the market heading into the election (and the potential honey moon period into X-mass '10. I am rather pessimistic for the market after that event. If you are to be long then use the above listed reference points as a barometer for entry and keep stops tight!

For those that must be long something, I would take a serious look at the gold chart and associated options. While I don't have a specific trade in mind, I am looking at the November $1300 calls in earnest...

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, September 5, 2010

CTS Spotlight for the week of September 03rd, 2010

Hello and welcome back to CRI's CTS Spotlight



09/03/10: The summer of 2010 is almost over and one can see the markets setting themselves up for the fall. While we see little movement in the currency and interest rate markets, Canadian and UK stocks have broken their respective downtrends and look like they want to test their spring highs in earnest. Considering the upcoming US Congressional elections this November, I don't see any major push lower until that event is out of the way. Elsewhere, Corn has finally broken out and registered a weekly bottom pattern. A few weeks ago we mussed at how long it would take for Corn to be dragged higher and now it too has finally turned the proverbial bearish corner. Refer to this weeks CTS spotlight for more on this. As well, for those OnlyDoubles subscribers out there, you should have put your latest position on (there is a hint at what the trade is in that sentence)....


Corn: I have included the chart above. To mix things up a bit this week. I have put the commentary on the chart itself. Offer feedback if you would like....

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

p.s. OnlyDoubles subscribers enjoyed taking profits on yet another OD trade! go here for more info...

Sunday, August 22, 2010

CTS Spotlight for the week of August 20th, 2010

Hello and welcome back to CRI's CTS Spotlight



08/20/10: The dog says of August are heavily upon us as we head towards Labour Day. A cautionary note, the last weeks of August often see very low volumes as many professional traders are away. Please don't be fooled into thinking that low volume price action can't be reversed very quickly in early September (as is often the case). Having said that, little movement has been seen this week in the currencies other than the Swiss Franc. Stock markets continue their malaise as bond prices get pushed higher on a daily basis. While many commodity markets have moved higher of late, some are looking a little 'toppy'. This week we see OJ breaking down as little or no Hurricane news may take the fear premium out of this market. Please refer to this weeks CTS Blog Spotlight for more on this trade idea.

Frozen Concentrated Orange Juice

This market is all about one work....Hurricanes....if there are a lot of them, expect OJ prices to be high. If there are few, expect prices to fall. So far this summer has seen a very quiet hurricane season and the charts seem to be pricing in the event - or non event in this case. Regardless, our time tested 50% rule, coupled with the classic Dow double tops suggests that there is a short trade here and potentially a very profitable one at that.

The chart above left shows the weekly price action in OJ for the past 18 months. Notice the tighter and tighter move higher. The predominant trend line that followed the move higher has just recently been broken. Not only has that trend line been broken, but the market put in a nice double top right at the break. One can easily see that prices are going to have a hard time getting back above the uptrend line and I would argue that what once was support (on the way up) shall now become significant resistance going forward.

The chart above right shows the monthly price action in OJ for the past 7 years. Notice here the dramatic fall (from '07 to '09) and the almost text book 50% retracement of that fall (from '09 to '10). Now that the market is no longer overbought or oversold, one can't help but consider the longer term trendline implications here. First off, a further rally from here seems to be quite unlikely and more importantly, real support on a monthly basis for OJ current sits at or near .70! This is a very risky market to be long...

So if a top is in, where might this market pull back to?

Our good old 50% rule shall help us here. Again, referring to the chart on the left above, we see that a simple 50% retracement of the massive move higher shall bring prices back into the 110 area (where we add the high plus the low and divide the result by two). Additionally, the real weekly support for this market exists near the trend-line from the major lows of the spring and summer of 2009 (ie. 100 to 110).

Putting these two pieces of information together, we can see that a move back into the 100 area isn't unrealistic, the question now - is it profitable to consider the trade?

List below are the two heaviest open interest option contracts for the March, 2011 OJ futures contract.



Considering that both of these options will have an intrinsic value well over double their current price (should we get a move back to the 50% level) I would have no trouble buying either. I will go for the 120 Puts simply because at 3.3:
1. I'm only risking $500 per contract so if the trade fails I'm not going to take too big of a hit.
2. By spending $500 per contract, I can justify buying two (total of $1000 invested) and then if the trade succeeds, I can sell 1 very quickly at a double and ride the remaining one to the trade's ultimate fruition.

Just remember,
1. don't risk more than 5% of your stake on any one investment idea.
2. the bulls make money, the bears make money....the pigs get slaughtered (so don't be greedy! If the position doubles, take it and be happy)

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, August 1, 2010

CTS Spotlight for the week of July 30th, 2010

Hello and welcome back to CRI's CTS Spotlight



07/30/10: As calm has returned to the credit markets the Canadian dollar has joined the collective counter trend rally against the US dollar. Bond and equity markets believe growth has peaked suggesting that there is now room for further government sponsored stimulus measures should the correction in stocks get too out of hand. Significant to Asian growth prospects, The Japaneses Yen has finally broken a long standing resistance line (Please refer to this weeks CTS spotlight blog for more on that). If Japan has indeed awoken, that region of the world will have yet another growth engine coming online. In the face of this, commodity prices in general are reflating with noticeable moves higher this week in Palladium, Wheat and Coffee. Further to last week's CTS, OnlyDoubles subscribers ought to have taken a position in Feeder Cattle.

Jap Yen: On first blush I thought this chart would be clean and simple - a powerful bull market off a nice base. After some study my opinion of the Jap Yen is much more cloudy and uncertain....typical markets!

The problem....I don't think the latest move higher in the Japanese Yen is a new bull market. I think this market looks exhaustive, and dangerous. It also leads me to further believe that the latest US dollar sell off is a trap. Through the two charts shown above, I will try and explain why...

Weekly chart (on left above): This market has been pointing higher for about 12 weeks since it put in a double bottom in the last spring from 1.0859. Over the past quarter we have seen higher highs and higher lows (most recently taking out the 1.138 resistance point) suggesting the late '09/early '10 correction had ended. Indeed, we are currently within shooting distance of the important high at 1.179. Should that be taken out, one must look for a move to the top of the weekly channel (at or near 1.25). We will cross that bridge when we come to it! For the time being, yes we are heading up and that is why CTS is positioned so. In fact, Regular CTS followers should be enjoying an almost 7 cent profit at this point. New positions should NOT be considered. Momentum players may consider adding to positions on a move through 1.179, but not until then.

Here is where the problem comes in for me...

Monthly chart (on right above): The first thing that jumps out at me is the massive monthly move higher since the '07 lows. Interesting here, we are currently within a cent of that long term trading range breakout target (1.165). Absolutely remarkable! As well, a 50% retracement of that massive move higher would bring prices back into the .99 area (or almost 15% lower!).

Yes this market is still pointing higher and if one is long from the weekly breakout (1.0859) then enjoy the rally. My hunch is we shall move higher through the rest of the summer. Should the lows of last spring be violated, there could be trouble - so watch the 1.05 level like a hawk.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, July 25, 2010

CTS Spotlight for the week of July 23rd, 2010

Hello and welcome back to CRI's CTS Spotlight



07/23/10: Little new in currency land as the correction from the spring moves continues. The credit crisis has abated for the time being and prices here appear to be trying to find stable ground. One exception, the Australian dollar, has resumed its' upward march as Asian growth prospect appear to dwarf those of the other regions. Backing this notion up, both Copper and Crude Oil have registered new long entry points. Of note this week, Feeder Cattle prices have broke violently higher suggesting a 20 to 30% price increase may be in the not too distant future. Please refer to this weeks CTS blog entry for more on that and a possible OnlyDoubles trade idea.

Feeder Cattle: Should the above noted bullish flag pole formation play itself out, one ought to expect a test of the 1.30 area going forward.

Trading Strategies:
1. One could be long from the recent breakout (at or near 1.15, with a firm stop below the recent lows at or near 108). The risk would be $.07 (each point is $500US) or $3,500 US per contract. If prices did move to 130 (and you sold) it would represent a potential profit of $7,500 US per contract.

That is a little over 2:1 risk reward, not bad but I don't want to risk $2,800 (or more!) and I don't want to be subject to a margin call - so lets take a look at a different trade idea.

2. One could buy the January 2011 Feeder Cattle $118 Call option for about $750US (refer to options sheet below)


if I bought the January $118 call option at $1.50 and let it expire worthless then my total risk/loss is $750US (no margin call ever!). If prices do move to $1.30 then this option will have an intrinsic value of .12 or $6,000US. That is a whopping 700% return.....now that is my kind of investing!

Considering our time tested principle of risking no more than 5% of our stake on any one play, one has to have at least 15,000 US in your trading stake to consider to trade idea. If that is the case then I highly encourage everyone to take a serious look at the trade.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, July 18, 2010

CTS Spotlight for the week of July 16th, 2010

Hello and welcome back to CRI's CTS Spotlight



07/16/10: The European currencies have rebounded from the steep losses seen just weeks ago. This has come on the heels of better fiscal numbers coming out of the 'PIGS' nations. This recovery however has come in the face of dramatically lowered global growth forecasts (out of the proverbial frying pan and into the fire). Confirming this notion; equities are moving lower while bond markets are moving higher. Adding validity, the industrial metals have rolled over. While Platinum has broken down, Copper, Palladium and Silver are looking a little toppy. As stated previously, governments around the world should be spending their way out of the slow down not pulling back. Unfortunately, they will only act appropriately when prices are crashing once again, won't we ever learn!

Platinum: The heavy industrial metals were the first to turn up way back in the fall of 2008. After a precipitous decline prices moved higher through 2009 and into the first half of 2010 in almost a perfect 50% retracement of the crash. Notice though, the internal strength of this market was starting to fail (RSI momentum divergance) as we moved into 2010. This was a warning that prices were not as strong as they would appear.

So if prices are indeed correcting, where is a logical target for us to consider going forward. Two numbers jump out to me:
1. A natural 50% retracement of the recent up move would bring prices back into the 1266 area.
2. A potential Head & Shoulders price patten also suggest prices want to come back down into the 1242 area.

This then will be my target window for platinum prices going forward. Unfortunaly, there are no options available for this commodity contract and as a result OnlyDoubles subscribers and (I myself) won't be participating in this trade....

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, July 4, 2010

CTS Spotlight for the week of July 02nd, 2010

Hello and welcome back to CRI's CTS Spotlight



070210: On the heals of further bond market strength and a growing belief that deflation is back in the mix; all but one (Germany being the lone holdout) of the equity index's have broken their respective up-trends, have registered new bearish chart patterns and/or have broken down in earnest. Fundamentally, the recovery wasn't all that great to begin with and now politicians are calling for tighter fiscal policy, the imposition of various new corporate and consumption tax regimes and a growing belief that various industries need to be more strictly regulated. Look out all you capitalists, its going to be a bumpy ride for a little while. Else ware, commodity prices look vulnerable too. While they haven't broken the way stocks have we may need to go through a period of consolidation before any new moves higher can be seen.

Stocks: Listed above are the four most significant stock index's in North America. The Dow Industrials, The S&P 500, The Nasdaq and The TSX 60 (important for us Canadian's....irrelevant to the rest of the world....lol). Notice the almost straight line up move we experienced over the past year. It is hard to believe the Dow was trading in the 6000's just last year! The important thing here (I believe) is that it would be perfectly normal and healthy for all of these markets to take six months and clean themselves up. Give us a 50% retracement, let's hear some real bearish sentiment out there, and if we could too please.....could we get a nice bullish momentum divergence while you are at it......maybe that is asking a little much....

For those OnlyDoubles subscribers out there, after some careful analysis, it appears an option trade just isn't profitable enough (from a risk/reward perspective) to consider. Should we get a rally up to test the respective stops, options positions may become attractive at that point...


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, June 13, 2010

CTS Spotlight for the week of June 11th, 2010

Hello and welcome back to CRI's CTS Spotlight



06/11/10: Some calm has returned to the currency markets this week. Additionally, equity and bond markets are settling down too. New signals registered this week include a nice breakout in Coffee (where it came very close to trading at a new yearly high) and Sugar (where a long over due bounce seems likely and a 50% retracement could be quite profitable). Please refer to this weeks CTS Blog spotlight for more on a potential Sugar options trade. Additionally this week, Soybeans and Soymeal held their recent lows and Oats popped on an oversold bounce. Interestingly, the meats look toppy again as Live Cattle has joined Feeders in consolidating.

Sugar: This market has fallen by more than 50% over the course of 2010. While we rode a good portion of the move higher, CRI was pushed to the sidelines when the market showed initial weakness last fall. Indeed, I even posted a blog about how one can miss the last part of a move higher but feel ok if the market subsequently breaks down. This market broke down and just kept on going!

Now that prices have fallen in half one might want to consider playing a long call option position. While I have little expectations for the old highs of $30 to be tested any time soon, a 50% bounce of the sell off is realistic. Buying the futures outright is one way to play this kind of market but I prefer an option. Currently I can buy the October 2010, $20 Call for 35 points (at $11.20/pt) that comes to about $390US. Should the market move back to the target ($21.70) by the middle of October this option would have an intrinsic value of 1.70 points or about $1900US.

Not a bad risk reward ratio indeed...

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, June 6, 2010

CTS Spotlight for the week of June 4th, 2010

Hello and welcome back to CRI's CTS Spotlight



06/04/10: The US dollar reigns supreme as new European nations (some of the former Soviet Bloc now) bring to light their respective fiscal problems. The credit crunch is officially back on, as LIBOR rates shoot higher and our Euro-dollar trade enters its' 16th week of being short. One result, most stock index's have broken down. Similarly, many of the commodity market bull trends are coming into question too. While soft prices are indeed looking soft, this week's CTS Spotlight will look at the grains and how prices look to be pointing lower here too.

Grains: While Soybeans and Soymeal are still holding their recent bottoms, Wheat, Corn and Oats (the leading indicator of the group) have been pointing lower for a while. This past week Corn and Wheat broke down in earnest and are now pointing significantly lower. The weekly charts above (on left) are well defined bearish chart patterns and are of no surprise coming out of the normal seasonal peak in May. These formations may take a few days to a few weeks to play out but I would bet prices are heading to the indicated targets eventually. From a longer term perspective, the monthly charts (on right) show just how high they took these markets into the peak of '07-'08. As well, they show that real support of both of these markets is still a good deal lower. Wheat's bottom from '05-'06 is between $3 and $4 while Corn's is between $2 and $2.50. Should the trading targets indicated from the weekly charts (on left above) be breached, I would expect the above indicated Monthly support areas to prove as ultimate support.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, May 30, 2010

CTS Spotlight for the week of May 28, 2010

Hello and welcome back to CRI's CTS Spotlight



05/28/10: In a week that saw the US dollar push to new relative highs and another stock index break its stop point (Dow below 9869) one can't help but get the feeling the cliche 'Sell in May and walk away' has been proven right once again. One significant reason for the general pull back in the market - The historically steep yield curve (of a year ago) has been flattening. Short term corporate interest rates have been moving up (please refer to CRI's TTA on Eurodollars) while long term bond yields around the world continue to be pushed down. This market action suggests that economies are slowing in general and more importantly, the credit crisis of '08-'09 may be back on. Elsewhere, commodity prices in general are consolidating while this latest credit crisis plays itself out. This week I have pointed the spotlight on Cotton and how a natural 50% retracement of the '09-'10 bull market could translate into a nice little double in the options market.

Cotton: As stated on the chart above, the Dec. $65 put option for Cotton looks very attractive. Currently the weekly 50% level is just above $60 ($60.9) and there is a noticeable gap just below that number at $60. Should the December Cotton contract trade back to those levels this option will have an intrinsic value of $4.10 or more than 500% higher than current levels. Considering the risk on this trade is roughly $315US and the potential return is over $2000US one who can take the risk ought to seriously consider it.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, May 23, 2010

CTS Spotlight for the week of May 21, 2010

Hello and welcome back to CRI's CTS Spotlight



05/21/10: In a week that saw the currencies settle down a little, one can't help but notice the dramatic flattening of the yield curve. The market is repricing both long & short rates as central bankers in North America prepare locals for the end of near 0% rate policy (of which CRI has been warning now for more than 3 three months - refer to this week's spotlight for more on that) and Europeans must now prepare for a potential inverted situation. As should be the case, the end of easy money may lead to the end of the equity party. Confirming this notion, the S&P 500 just this week tripped its stop (on a move just below 1056). So while all the equity markets are still tentatively pointing higher, 5 of the 8 have had their long positions stopped out and thus liquidated.

Eurodollar: CRI warned its readers weeks ago that not only was there a top in the Corporate short term interest rate market, but that the prevailing 'easy' short term interest rate market was soon to come to an end. While the latter is up for debate, the former has indeed played itself out. In a recent report (issued February 19th, 2010) CRI suggested starting to build a long term position in the Eurodollar market [by buying out of the money PUT options on deeply deferred contracts - in this case it was the December 2010, 98.00 PUT at .07 ($175 each)]. While I would like to continue to add to that position, it has moved up by 50% and on any short term bottom in price I may elect to just take the money and run.....we shall see...

Regardless, this is such a good looking trade that it ought to get its own blog entry for the ages, so here it is.

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, May 16, 2010

CTS Spotlight for the week of May 14, 2010

Hello and welcome back to CRI's CTS Spotlight



05/14/10: While the US dollar continues to move higher in earnest vs. its European currency pairs, gold has broken its old high and looks to be pointing towards $1400 US per oz. More significantly, Silver has registered a massive Cup & Handle formation suggesting prices there want to move into the $24 US per oz. Please refer to this weeks CTS spotlight for more on these two markets. Elsewhere, Natural Gas looks very interesting as it has held last falls lows and put in a night tight double bottom. I shall look to re-establish my long option position first thing Monday morning (through the ETF - UNG) and would advise those that can take the risk to do so as well. Lastly, I see the F. Cattle market is settling down> while I am reluctant to play this short, it does lend support to the grains bottoming and for the Soybean bottom to be legitimate.

Gold & silver. Above I have attached the weekly charts for Gold and Silver. While I had been reluctant to move into these markets heading into the seasonally 'toppy' time of year. I can appreciate a violent breakout when I see it. As well as price breakouts, notice how the momentum indicator (in this case RSI) has put in double bottoms and broken out as well. Silver looks especially bullish here as it has just now confirmed a massive Cup & Handle formation. This price pattern suggests prices want to move into the $24.00/oz area or 26% higher than current levels.

For some historical perspective, gold topped out at $800/oz in 1980 and silver at $50/oz. If the same relationship were to be true today, gold at $1200/oz would imply a silver price near $75/oz!

That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com

Sunday, May 9, 2010

CTS Spotlight for the week of May 07, 2010

Hello and welcome back to CRI's CTS Spotlight



05/07/10: After many weeks of reporting 'nothing happened this week' we are now seeing some volatility come back into the market. The greenback had one of its biggest moves to the upside in years as money flees Europe and the commodity related currencies. As reported previously, I would avoid anything to do with the Euro until we see governments there step up in earnest to deal with the 'PIGS' nations debt issues. Stock index's took the European uncertainly hard and many of the long standing bull trends are starting to break. Keep in mind seasonality too and the old saying, 'sell in May and walk away'. Elsewhere, Crude and its' products have broken their bullish patters, the metals look 'toppy' while food prices in general moved little. One interesting market this week, Soy-oil, has put in a tight weekly double top. Is this the end of the bean oil run? We will examine this more closely in this week's CTS spotlight...

Soy Oil: This market (like move around the world) has been slowly moving higher since the meltdown of late 2008 / early 2009. That rally has run into a fair amount of traffic near 40.00 and indeed we have recently failed. While a weekly double top price pattern has been confirmed, my expectations for the pending correction are limited.

From a weekly perspective, the current 50% level happens to be right where there is a gap that needs to be filled in. The fact that these two levels are near each other suggests that the market does want to go down into the 35 area but that expectations for a substantial move beyond that should be limited.

From a monthly perspective, the peak from 2004 shall represent support as well as the uptrend line from the lows of 2005. Again these points come together between 30 and 35.

These two charts suggest to me that any correction in bean-oil (back into the low 30's) ought to be considered as a buying opportunity and that the pending correction (and short trade if you so choose to participate) will be limited at best.


That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
http://www.the-rational-investor.com