CRB

[rffrydr]

How high can you fly. Another day, another divergence: this time it's all of em.


http://pg.photos.yahoo.com/ph/h00ey@sbcglobal.net/detail?.dir=4d31&.dnm=78cescd.jpg&.src=ph

[rffrydr]

Rising wedges are one pattern I can't stay away from. Taking another stab at the Aussie vs. Yen


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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Three higher tops on the weekly with (un)matching divergence on the stochastics. Don't want to be short grains come July but that's a way's a away.

Short Dec. Corn today. (against march '08 for safer play) Short soybeans. Risk MidEAst blowup and stay away from crude.
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Today is the Tomorrow you worried about Yesterday!

[Prospero]

[rffrydr]

Wrong again! No sooner than I give up on the May high thesis--with everything afterward just money jostling--than it's back in play. The upthrust after distribution looked so right. Again, chalk it up to the "ethanol effect."

Scalped 60pts out of the Aussie yesterday (near its highs with Dow off 130) but have no trades on this so no consequences--except my pride
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Hedge Funds adding grain elevators to portfolios (I wonder if it's any of those who are in margin trouble?).

http://www.cnbc.com/id/15840232?video=187564434&play=1
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

WRONG. Consolidation from May has been busted through. Unusual for upsloping phase after long rally to to blow higher but that's what's going on. Setup in bonds (and stocks?....) offer potential for runaway market. And all I got is this one stinking cotton contract.

The grains look as packed up with Funds as they can be--this kind of rally this time of year is truely extraordinary. And in the face of bearish fundamentals, huge crops in S. America, liberalization of Ukrainian export policy, big plantings in Mexico,.....Passive indexing giving way to trend following. La Nina (wet spring dry summer) part of the story. Funds open interest near record absoulute terms, still room relative terms.

USDA outlook conference next week may be tightening carryover. Spain announces 60 new biodiesel plants. $1.10/gallon production costs last year for ethanol are now over $2. Congress says go. Hockystick curve? Short-term beanoil stocks are at records. Grain elevators now in the margin trouble. Hard to sell before March 30 crop report.

Dec07/March08 spread a "safe" way to play this. Might have to buy sugar today....

Prospero, what's happenin' here?!

[edit: the "january effect" fund allocation in context of not unusual CPI boost during same. --An inflationary state of mind]
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

A Barclays survey showed that a survey of 240 institutional investors expect assets under management to reach $120B-$150B by end-
2008 vs. $100B currently. The majority plannedto allocate 10% of portfolio to commodities.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=917c17a0-a4bd-4b44-a18e-10b9fc93cbc3
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Weekly CRB had to hold here to validate the upthrust out of (5 point reversal) distribuation. Soymeal holding up the grain group (thanks to corn with altitude sickness). Crude showing the volatility and still driving the other markets (indexing?)... still has to overcome alot of moving averages. China on holiday.

Industrials going their own way (yield-curve?)

http://stockcharts.com/h-sc/ui?s=GSG&p=W&b=3&g=0&id=p46912409760

Stay tuned
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Big divergence on dollar whacking today: gold strong up; copper stonger down. Not a time to be saving your pennies.

Grain ETFs opening soon, turkeys already sky-high, fish in short supply, there are still roll yields to be had for the "hedgies"--stagflation is not off the table.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

GSI broke better, and led. But CRB looks like classic upthrust after distribution phase fakeout. Techies?

[rffrydr]

The old (May) double-top is still the top.

I'll go ahead and call it THE TOP. Went short GSCI today--what the hell.

[HenryTo]

If this deal doesn't go through, then it would definitely put pressure on the Australian $:

http://www.marketwatch.com/news/story/story.aspx?siteid=mktw&guid=%7BA17CFB77-A69D-4174-B90E-418400BDAB61%7D

[rffrydr]

Aussie at record longs.

http://www.dailyfx.com/story/charting_center/futures_positioning_cot_report/Aussie_Longs_at_Record_High_1162219751974.html

[rffrydr]

Economist's Buttonwood column on the evolution of the "roll." Note the highest (60%) mispricing of listed vs. unlisted commodity prices--which showed up in this week's wheat trade on the CBOT being priced out of the market with Egypt, etc. etc, etc...


Buttonwood

Roll over

Oct 12th 2006
From The Economist print edition


Overcrowding is unbalancing the world of commodities


SOD'S law has been at work again. No sooner have investors rediscovered the lure of commodities than their own enthusiasm has ruined the rationale.

As an idea, commodities sounded great. Investors made too big a bet on shares in the 1990s. Bonds offered too low a yield to produce exciting long-term returns. Commodities promised a decent long-term narrative (Chinese and Indian demand) and the prospect of diversification, the only free lunch in the investment world: positive returns that are not correlated with other asset classes.

Then something went wrong. Much has been made of the exciting long-term returns from benchmarks such as the Goldman Sachs Commodity Index. But the GSCI, which has a heavy weighting in oil, is showing a loss this year.

Part of the reason is that futures prices have moved above spot, or current, prices. Usually, futures prices have tended to be below spot prices. This created a positive “roll yield” for commodity investors, who could hold on to contracts until they became more valuable. However, the roll yield has now turned negative, so that investors in futures contracts are losing. In the year to date the roll yield has been minus 13.35%, and the annualised yield on the next two months' contracts is minus 38.4%.

Investors may actually have caused their own difficulties. As they have tried to exploit the positive roll yield, the returns have disappeared.

A wider problem may be at work. Diversification depends on reduced correlation. Commodities were a pretty neglected asset class in the 1990s, so it was no surprise they failed to move in tandem with shares. But now they have become mainstream, the correlation seems to have increased. Shares and commodities are both plays on global growth.

Commodities have certainly become more closely linked to each other. Over the five years to December 2005, the correlation between oil and gold was just 0.13, according to Capital Economics, a consulting firm (perfect correlation would be 1). In the past six months it has been 0.64.

This could be due to inflation. In recent weeks, as the oil price has fallen, so have inflationary concerns, leading investors to sell gold, which is traditionally seen as a hedge against rising prices. But gold has also become much more strongly correlated with base metals. This suggests another factor; the flow of investment money into commodity indices. When pension-fund investors buy an index, all the components are bought indiscriminately, regardless of their true value.

It is a classic paradox. What works for the individual cannot work for the group. Yogi Berra, the baseball player, grasped the problem when he said: “Nobody goes there any more; it's too crowded.”

The herd instinct explains why investors are buying commodities several years into a bull run. According to Merrill Lynch, a sign of speculative excess is that the spread between prices of listed commodities (bought by investors) and unlisted products is a record 60%.

There are still plenty of believers in the long-term commodity case. Apart from Chinese demand, the bulls point to restrictions in supply, caused by years of underinvestment and the time needed to bring new resources into production.

However, this applies only to some commodities. It is easy to boost agricultural production pretty quickly. Gold is rarely driven by industrial demand but by the yellow metal's perceived value as an alternative currency and by the reserves policies of central banks.

Other metals are driven more by supply and demand and represent a play on global growth. But the unwary investor can still be caught out if he relies too blindly on the China case; in steel, for example, the People's Republic has moved recently from being a huge consumer to becoming a net exporter.

Oil sits in a category of its own. It is an indicator of geopolitical risk. And it also acts as an automatic regulator for the economy; hitting consumer spending when its price rises and boosting it when it falls. Even attempts by the Organisation of the Petroleum Exporting Countries to agree on production cuts have failed to halt its decline.

As investors become more sophisticated, they will move away from commodity indices. Kevin Norrish, director of commodities research at Barclays Capital, says there has been a surge of issuance in structured products, investment vehicles that deliver a return tied to specific commodity prices. Another implication is that investors need to realise that the best time to diversify into an asset is when no one else wants to do so.

[rffrydr]

Having suffered a heavy debunking from the FT in the last weeks citing a study disproving the fibonacci series in market indices (http://biz.yahoo.com/ap/061020/sector_wrap_regional_banks.html?.v=1) I nevertheless feel tradition-bound to point out the 61.8 retracement in the CRB weekly.

Stay tuned.