TRADE UPDATE: COFFEE ROBUSTA 2008-09-23

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

I closed half my short at 1717 today (+263 points). The Jan Contract is will be on notice day from 2nd Jan 2009 (i.e. shorts can issue delivery notice). In addition Liffe has discontinued 5 tonnes (D) contract and replaced by a 10 tonnes contract (RC) so DF9 is the last contract to trade in this series. March contract (RCH9) is trading at 1550 today while DF9 has been very volatile lately as the shorts are squeezed and then longs are squeezed before every one tries to close their positions. However I feel that shorts are in control. The last trading day would be 30th Jan 2009 and I would aim to come of this position fully by then. As of now I am not planning to roll over this position to March.

UPDATE: When going gets tough .... the Dollar gets going

My Development as a Commodities Trader: When going gets tough .... the Dollar gets going

Looks like Dollar bull days are getting numbered now. I have gradually come out of all dollar long positions and now actively looking for oppportunities to short dollar. One place I like to be in would be JPY. Another interesting place is AUD and CAD. Fed recent action are very inflationary and therefore it is a blessing for commodities and commodities driven currencies like AUD and CAD. Another interesting place to be in is EUR mainly because EUR "might" attract some diversifaction funds in search for a stronger currency bloc. 

I will update in coming days if short dollar trades emerge.

TRADE UPDATE: Is silver setting up to outpace Gold?

My Development as a Commodities Trader: Is silver setting up to outpace Gold?

The trade has moved in right direction since the day I posted it. I have now able to build up a suitable position in short GOLD and long Silver with average ratio of 80.

Fed cutting rates to almost 0% is inflationary in nature and may give a rocket boost to commodities and may even plunge dollar. 

It seems time to become commodity bull is coming again. I am keeping an eye on that.

Is silver setting up to outpace Gold?

SILVER SIH9/ZIH9 GOLD GCJ9/ZGJ9 PAIR

Buy 16 Silver and Sell 10 Gold futures. 

Stop when GOLD/SILVER > 100

We saw spectecular run up in the the prices of Gold and Silver last year with Gold culminating into an all time high and silver in a significant high before both of these "precious" metals started falling like a stone so far this year.

Silver in particular has fallen by nearly 60% from its high whereas Gold has managed about 34%. This is quite expected as Silver tends to be more volatile of the pair and tends to shoot excessively in both directions (up or down).

Now I made an interesting observation that the last bull market in Silver started in March 1993, nearly 6 years before Aug 1999 when Gold bottomed out. So even though I am oscillating between Bear or Uncertain camp for Gold it "could" be that Silver has seen its correction and may be it is turning its head upwards. 

In addition the Gold/Silver ratio is hovering at 80 after hitting nearly 92.5 in October 2008. Such high readings were noted in 1993 when silver started turning up as I pointed out earlier. The reasonable level for this ratio is 50 and the historical mean level for this ratio is actually 16. This points that silver now is extrement cheap compared to Gold. 

An adventerous trade is actually to buy Silver with stop below 8.40 however in the current climate of volatility it could be safer to trade this as a pair and then cover Gold Short when inflation start raising its head again.

TRADE UPDATE: All that shines is not Gold

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

I am out of this trade again at 760 (+24 points) though I was hoping to ride is much longer. The range action is frustrating me in most markets and I thank all my guardian angles whenever I can come out profitably on any trade in these markets. I am by nature a trend following trader and therefore the range kills me many times.

The price action on S&P during Friday session rang some alarm bells for me and I was in no mood to leave positions over weekend. In addition Gold did touch my first anticipated breach level (743) but bounced off strongly.

If I see weakness next week I might go in again as I am still not a bull of Gold but for the time being, remaining out of this market seems like a reasonable position to be in.

Rice is Rising

ZRH9 (Rough Rice)
Buy on break above 1426 stop below 1330 target 1559 - 1669

While reviewing grains chart it caught my eye that when all other grains (wheat/soy bean/corn/oats) are making new lows and plunging further, rice seems to be the one which has bounced off smartly and also resisting any down days in other grain complex. Rice has bounced off a long term support and therefore some upside could be possible. I am watching if Rice breaks above 1426 or if 1330 level is not breached before entering the trade.

Since fundamentals come in charts first I will also keep an eye on any fundamentals developing.

Point to note is that rice is bit illiquid on CME and therefore can easily be manipulated so it pays to be on the right side of the manipulators. For the same reason I would look to trade March 09 contract (ZRH9) and not the front month Jan 09 contract (ZRF9).

TRADE UPDATE: All that shines is not Gold

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

And once again (after the holiday related rally is out of the way) I am back again shorting gold. For a small time I was wondering (when I closed earlier short position - see previous update) that I might have to turn to Gold bull soon. But it seems from chart that the recent rally was nothing but a counter trend push during holiday season (that is why it is a good idea to be out of positions during the mad holiday period).

I have taken April Gold GCJ09 short at 784 area with stops above 853. I am planning to add up to 834 and looking for break of 743/699 and 688 for confirmation of trend. I am targeting 650 as first stop and possibly lower thereafter.

These trades are continuation of main theme in the first update so I am not repeating the arguments. Or simply follow the chain in the trade updates.

TRADE UPDATE: COFFEE ROBUSTA 2008-09-23

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

DF9 (LIFEE ROBUSTA COFFEE)
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.

TRADE UPDATE: All that shines is not Gold

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

I am back in this trade now that two uncertainties are out of the way. Fed has cut as expected and BOJ has cut as well. This should help bring some "stability" in the markets and cut those wild swings we have been witnessing lately.

Since long bonds (TBOND) anticipate future interest rate move, it is quite reasonable to expect that chances to interest rates rising in future for US are higher than lower. They anyway do not have a lot to reduce. There is of course talk of US rates going to zero or further down but I feel that would require a real armagadon to surface. As of now I am not hanging my hat on zero rates in US. Therefore I only see downside in long bonds. See Few bubbles left to burst.

With that said, I would expect Dollar to go up, Yen to decline (after an initial bounce up may be until 0.010600 area on IMM futures (JPYUSD) (94.34 in USDJPY term), bonds to fall and stocks to go up (possibly after testing some downside around 900-880 in S&P 500)

All this would leave gold on a precipatious path. The diwali demand from India is over and they did not buy as much jewelary as expected. Rupee decline has made Gold expensive in India even after recent fall in USD terms and the trend is likely to continue. My target for 650/550 remains and some projections are pointing to 450 level as well but that is bit far and I am merely keeping an eye at that level.

I have gone short at 771 level yesterday with stops above 840. At the first instance I am looking for breach of 681 where I will add to shorts and move stops down. I am looking to remain short gold until the inflation starts raising its head up and that would require the economies to improve.

What can de-rail this analysis is if US end up lowering rates further. Or stocks fail to stabilise and make new lows.

UPDATE: Trade Ideas 22nd September

My Development as a Commodities Trader: Trade Ideas 22nd September

GBPJPY and AUDUSD trades worked liked a charm. Unfortunately for me I came out of them much too early with smallish profit but those who stuck to their guns must have gone walking to bank today.

TRADE UPDATE : TRADE UPDATE: All that shines is not Gold

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

I am out of this trade today at around 690 region. I have not turned bullish on gold yet but something is in making and I will look at that carefully during weekend.