CTS Spotlight for the week of June 4th, 2010

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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

CTS Spotlight for the week of May 28, 2010

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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

CTS Spotlight for the week of May 21, 2010

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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

CTS Spotlight for the week of May 14, 2010

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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

CTS Spotlight for the week of May 07, 2010

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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

CTS Spotlight for the week of April 16, 2010

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04/16/10: The currencies remain little changed this week in the face of a daily top in the US dollar. The posted upside target for the greenback was hit and it remains to be seen whether this short term top will turn into a weekly top. While this going on, gold has moved up to break its weekly top suggesting prices have found a good deal of buying interest just above $1000. Elsewhere, the soy complex is starting to show signs of strength as we head out of the seasonally 'demand' driven market and head into the 'supply' driven market. Please refer to CTS blog for more on that...

Soybeans: Basically reiterating what I wrote on the chart. Massive weekly wedge appears to have broken to the upside. We are finishing up the 2009-2010 crop with a base in and around 900. Should there be any fears of flood or drought price could move higher in earnest. Regardless, the current weekly 50% and the highs from late 2009 sit in and around the 1085 area, so that shall be my initial upside target as we head into the spring planting season.

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 April 02, 2010

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04/02/10: There is little change to the broader commodity markets as we head into the Easter holiday weekend. Equities continue to rise, bond markets look weak and the US dollar continues its dead-cat-bounce. Industrial metals are outperforming precious, crude continues to dominate over Nat. gas and the meats continue to outperform the grains (where Corn has now joined the bearish camp). Most notable this week, the Japanese Yen has broken down in earnest (refer to this weeks CTS for more on that)...

Japanese Yen: This currency (along with many others) has been on a wild ride against the US dollar over the past few years. First it lost almost 20% of its value then turned around and appreciated more than 40%. One may even argue it has acted as more of a 'safe haven' than the greenback. Notice how the Yen bottomed at almost the exact time the S&P 500 topped out. Has this violent move higher played itself out?

From a monthly perspective (chart on right) we see that the current 50% level and the highs from late 2004 sit around the .985 area. I would be willing to bet there will be a fair amount of support at or near that level (or another .07 lower to go).

From a weekly perspective (chart on left) we see that over the past two weeks the market has confirmed a massive double top price patten. Prices have not only established a new weekly downtrend but have also broken through the uptrend governing this entire bull run.

Something significant is happening here people! Keep in mind, the gold market has been trending lower for 10 weeks, the US Dollar index has been trending higher for 11 weeks and the Eurodollar (that is the corporate US short term interest rate market) has been trending lower for 7 weeks. The market knows something...will any in the broader media catch it? only time will tell, but my hunch is no...

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