The Financials Pit Review

For the week of March 8^th, 2010

By PitGuru Frank LaMantia

Is Cablevision annoying anyone else? First they mess with the Food network - and now ABC. However, they did give free rentals last night for customers missing the Oscars. In all seriousness, it is not really their fault. Many of these companies want millions and millions of dollars, which seems to be squeezing Cablevision. The Disney channel had also wanted more money - up to $40 million more. The more money Cablevision makes the more of a cut these companies want.¹

Today, Europe announced it may be necessary to have an emergency fund for European countries. Basically, this would be a crisis fund for 16 nations because Greece's situation has caused an unsettling feeling throughout the region. Supposedly Spain, Ireland, Portugal, and Italy could be next and it may be hard for the economy to shrug off the next country in turmoil.²

Is the S&P's next stop 1150? Technical charts say that this upward trend could hit that level. Remember: in a recession, expansion and contraction can happen every few weeks. If it does hit this level, traders could take profits; especially if half-hearted news comes out from economic data. In premarket trading it is down a little over a point to 1136.³

A contraction in the market is probably inevitable, but timing it is not the easiest thing to do. The S&P has had a good run but could sell off over the next week. Many might be thinking the dollar could fall too. The dollar has remained strong through so-so economic data and has gained strength due to overseas issues. As more issues arise in the Euro zone the dollar could have more room. Though it is down today -0.143 to 80.289, the 84 level could be a possibility in the near future.⁴

¹ http://finance.yahoo.com/news/ABC-returns-to-Cablevision-apf-1270265502.html?x=0&sec=topStories&pos=8&asset=&ccode=

² http://finance.yahoo.com/news/EU-considers-its-own-crisis-apf-452249865.html?x=0&sec=topStories&pos=2&asset=&ccode=

³ http://www.cnbc.com/id/17689937/site/14081545/

⁴ http://www.cnbc.com/id/15839178/site/14081545/

***chart courtesy Gecko Software’s Track n’ Trade Pro

The Energies Pit Review

For the week of March 8^th, 2010

By PitGuru Daniel Cronin

The energy markets rallied again last week rising to some of the highest levels of 2010 with a rallying stock market as nonfarm pay rolls declined at a much better rate than anticipated to the tune of -35k.  Oil advanced to $82 and keeps making new high after new high with the wti spreads rallying. This means higher prices as well this week.  I can see Crude Oil trying to test last year’s high of $83.60 as prices are only $1.60 away right now.  Energies rallied to open the trading session last night as French President Nicolas Sarkozy said the group of nations using the euro is ready to rescue Greece should the government struggle to fund its deficit. This will only add fuel to the fire for Crude if Greece gets bailed out as this will help the Euro and weaken the USD. “Sarkozy’s comments were among the strongest warnings from a European Union leader to speculators betting against the euro and Greek bonds. George Papandreou's government last week passed further austerity measures and sold 5 billion euros ($6.8 billion) of debt.”¹ 

Heating Oil and Gasoline also making very nice moves to the upside as the Heat Cracks trade at $6.75 and Gas cracks are way up at $14.00. I believe that these products will do well against the crude oil this week with cracks making a move to the upside. 

Natural Gas is just down on its knees again pleading for something, someone to help out its price. It has lagged heavily against Crude these last few weeks with prices falling down to $4.30.  Inventories are still very high and the cold weather has left the Northeast temporarily as prices trend toward the $4.00 mark.  I won’t look to start getting into this market until prices get sub $4.00 again.

The Softs Pit Review

For the week of March 8^th, 2010

By PitGuru Jurgens H. Bauer

Coffee fundamentally has two schools of thought. One where people argue that the new Brazilian crop is closer to 60 million bags, and the other where folks believe that the crop is closer to 48 million bags. The latter includes (so say reliable sources) several grower cooperatives. Now you can also factor in that Colombia has over-hedged (oversold against their crop) and has a shortage of high end coffee, which is being demonstrated by the high differentials which have managed in the last month to move back up from the mid +50's to the mid to high +60's - and we've got ourselves a ball game. Now while the tightness in Central America and even Brazil's differentials have improved, there still is the technical picture to view. Before I get to discussing that aspect, also note also that according to ICO statistics there is a gap between world growing consumption and production and inventories. Technically the market cannot seem to move up and out of the down trend. Spec funds are short and the market seems poised to make a move, from its action I hold puts and favor the short side.

Cotton is stalling. Fundamentals are potentially less friendly as exports slow and cert stocks increase. The charts look as if forming a flag, but may be building a top. Wednesday the market will receive the USDA crop report and then at month-end Planting Intentions. Typically, cotton is vulnerable at this time of year, but being that the participants have changed perhaps this will not be the case. I tend to think perhaps the old crop new crop spreads will see the biggest price swings, and am not comfortable unless using options to play this market.

Sugar prices made consecutive lows for much of last week. Eventually they did hold and a short covering rally ensued. Has the market bottomed after retracing the year's gain? Fundamentals have not changed yet there is reason to expect supplies to not be as tight as originally thought, due to speculative influence. I'd like to see a range established, with support proving itself. Volatility has not yet dropped, but ought to... The key here will be physical demand.  

Cocoa prices had been receiving a lot of negative play and are trying to hold above 2800, yet remain below 2900. While it may see efforts to return back above 3000 that should be a struggle given the current economic climate.

OJ values improved last week as specs likely taking on fresh long positions ahead of Wednesday's crop report. February's number estimated the crop at 129 million boxes; look for a further reduction of about 5 million.

***chart courtesy Gecko Software’s Track n’ Trade Pro

The Metals Pit Review

For the week of March 8^th, 2010

By PitGuru Daniel Cronin

Precious metals had a decent week as Gold rallied up to $1,145 and Silver gained more than $1 to trade at $17.75.  The USD is in a very tight range here with the Euro USD trading between $1.3450 to $1.3715 in the last few weeks. Greece's bankruptcy/bailout plan has a direct effect on this either breakout or sell-off here.  The dollar fell as much as -.6% against the euro on the Sunday session after French President Nicolas Sarkozy said the euro region is ready to rescue Greece, before Greek Prime Minister George Papandreou meets U.S. President Barack Obama tomorrow. This is a key political story here and will greatly affect the Gold, Silver and platinum markets. If Greece does get bailed out it will send these markets higher as the Euro will gain against the USD, if Greece goes bankrupt you will see $1,100 Gold again.  I believe in looking at a buy on a dip as Greece will most likely get help and get bailed out. I will also look for some cheap out of the money calls and feeling it would be a smart play.

Copper has been having a very rough time trying to break the $3.50 barrier here as prices did rise last week as Chile's earthquake sent the metal soaring at one point to the yearly high of $3.48.  Prices will have a very hard time getting through this $3.50 number and I believe this is a good point to start looking at short positions.

***chart courtesy Gecko Software’s Track n’ Trade Pro

The Grains Pit Review

For the week of March 8^th, 2010

By PitGuru Matthew Pierce

The previous week saw a choppy downside with only bean oil showing any type of sustainable strength. This is the time of spreads, as I have stated in morning broadcasts over the previous couple of weeks and subscribers are well aware that there are plenty of opportunities out there right now. Intra as well as intermarket spreads are going to be my focus heading into the all-important planting report at month end. Flat price has a definite downside bias heading into planting but I feel beans are undervalued if it reaches as low as $9.00 basis May.

Both corn and wheat could continue to have a modest downside bias from current levels but wheat is running into support at the bottom end of the range. Meal versus oil is interesting in that the market has mountains of bean oil with crush levels only adding to this problem. There is limited interest in eating into the 3.2 billion lbs of oil making this a weak fundamental situation in spite of the macro support garnered from crude oil. The flip side of this is the uber-bearish meal market. The meal chart is a disaster while the bean oil chart is almost straight up. The obvious bias here would be long meal short oil. The problem with that is the situation in meal, though oversold, is more bearish than anything I can find on the fundamental situation. With Ethanol grinding at an epic pace there are plenty of DDG’s flooding the protein feed market making meal even cheaper as farmers supplant with cheap mid pro DDG. This could offer oilshare the opportunity to widen out to 50% if crude oil continues to hold and/or rally.

One way to short oil is buying SK puts while selling SK calls. That would be a play for risk tolerant traders so be aware of risk parameters if looking to trade. More responsible methods of trading right now promote buying beans on the dip looking for a historically-backed rally through planting. I am also looking at SK calls on the cheap with volatility sitting on either side of 25%. This is quite low as compared with corn at 29% and wheat at 33%.  I like owning beans on the dip, owning wheat versus corn at current levels and bear spreading corn. Subscribers can see my plays via the morning wires.

Overall the market is looking for information from Wednesday’s WASDE report with S. American production totals the biggest numbers of interest. Following this the trade has to decide about weather, S. American finishing production and Chinese demand before planting this all important crop in April and May. No weather concerns are seen either here or S. America so look to macros and WASDE for best direction this week.

***chart courtesy Gecko Software’s Track n’ Trade Pro