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

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