My Development as a Commodities Trader: COFFEE ROBUSTA 2008-09-23

Sell 1980 - 2080 STOP 2200 Target 1580 - 1450 - 1050

I am back in this trade today with a short initiated at 1980. I am looking to sell up to 2080 level. Break below 1580 will be first target. I am looking that this down leg could go well up to 1050 level in 2 - 3 months.

Coffee has climbed lately (fortunately since I came out of my earlier short) but now I feel that up move is completed. The futures have just touched 200 EMA and dropped from that point. In addition the general climate for coffee producers is not great. Producers have faced "credit crunch" and therefore rallies could meet with fresh selling.

Remember we are now trading Jan 2009 contract DF9.


UPDATE: Looking for bottom in an abyss

My Development as a Commodities Trader: TRADE UPDATE: Looking for bottom in an abyss

This bottom (800 region) in S&P is now tested for the 5th time and with progressive lower lows. This makes it very weak and now I am not sure if it will hold in a meaningful way. Which means I need to analyse this and other markets in light of current situation. My option positions are with limited loss so I am leaving them on but most likely they will expire with loss and I am on sideline waiting for a clear direction. Tempting as it might sound, I am not keen on shorting this market as of now. And the weak bottom is not encouraging me to take long positions.

Technical and fundamentals are coming at loggerhead at current point. US markets have not seen 5 consecutive down months (even in 1920) so technically there can still be a rally but fundamentals are very weak.

Time to attend to the the garden and other matters while markets find a direction.


TRADE UPDATE: Looking for bottom in an abyss

My Development as a Commodities Trader: TRADE UPDATE: Looking for bottom in an abyss

Even though the low point of S&P was breached today (816.75 previous 825) the rebound from the low further strengthens the case that a rally may be in the making. I was glad my position was taken via options so I there was no stop loss trigger (my losses are limited by the virtue of options) and I am happy that the market has changed direction after hitting the lows. Next few days will confirm if this rally has legs and then I can add aggressive positions.

TRADE UPDATE: All that shines is not Gold

My Development as a Commodities Trader: TRADE UPDATE: All that shines is not Gold

I am now (once again) out of this trade at 729 (about 42 points). Failure to breach 681 concerns me today. I am out of this trade now and need to watch if I end up becoming bull for gold in near future.


Volatility and Range Bound Market

General Markets

The markets tend to be in two phases - trending and range bound. Trending markets are like thundering herd of bulls or fierce army of bears attacking fearlessly, pushing every thing in their path relentlessly, pausing only for a short breath from time to time. Range bound markets are like hand to hand flight between pigs and vultures with bulls and bear firmly entrenched, peeking their head out from time to time to fire a bullet here and there and then going back to their trenches. Neither side gives up their position and pigs and vultures end up losing money in the process. However any one with experience to combat fighting from the trenches (or with benefit of having read Joseph Heller's Catch 22) knows that life in trenches is not very exciting and finally something or someone has to give way and then the trend start again.

We seem to be stuck into those ranges lately and these seem to the treacherous times when one has to sit in filthy trenches and wait for trends to emerge. Any one brave (or mad) enough to venture out charging at the other side is likely to get torn to pieces. This explains the lack of updates from my end for sometime.

My view points are that October has set lows in the equities markets (and highs in the bond markets) and I am trading accordingly in that line but using more "options" instead of raw "futures". This can help limit my losses and also allows me to get ready for the breakout it arrives.

Some of the commodities are getting interesting as well. Cotton (CTH9) appears to have bottomed out and I would expect bounce soon but once again I lie in wait before a clear signal is on cards.

Cocoa (CH9 on liffe) and Coffee (DF9 on liffe) appear to be making short term high before coming down once again. I have traded them from the short side and I have been out of this trade as per previous updates. I remain on sideline to take next position. So the story can be that people in recession are more likely to clothe themselves instead of indulging into a hot mocha with choclate muffin.

Oil (CLZ8) appears to be following stock market tick for tick and the pricing is more demand driven now then supply driven. However, I feel that such low prices in Oil will sow the seeds for next bull markets as the lack of investment in alternatives and new production will land us in the same (or worse) situation when (and if) the world economy recovers again. So I lie in wait for a turn in Oil before becoming a bull again however current market is too volatile (and has some downside risk) before taking such positions.

As of now I remain short of Gold, Long USD and short TBond.

And I lie in wait in boring smelling filthy trenches.