If China is increasing protein in their diets and buying more soybeans, then maybe you should be long soybeans. If China is stockpiling copper to have an ample supply for building an infrastructure, then maybe you should be long copper. If rumors circulate that China is diversifying their reserves from US dollars by buying precious metals, then maybe precious metals should be in your portfolio. China has become a major energy user so there is a logical potential for energies to bid higher for years to come. The moral of the story here is to view what China does as to what the smart money is doing and maybe investors should follow their lead.

June gold futures prices are hovering near the top of the recent trading range as the market is in a four-week-old uptrend on the daily bar chart. A close in June gold futures prices above solid technical resistance at last week's high of $934.80 would provide the bulls with fresh technical strength to suggest another leg up in prices in the near term. The next upside technical objective for the gold market bulls is to push and close June futures prices above chart resistance at the March high of $970.00 an ounce. A push in prices above that level would open the door to a challenge of the February high of $1,009.80. The contract high in June gold was scored in March of 2008, at $1,035.00.

Interest rate products stabilized on Tuesday allowing the market to digest yesterday's swift sell-off. We warned you last week that this would be a slow news week...and it has been. The only guidance that Treasury traders seem to be relying on is the direction of equity trade. Unfortunately, thin stock volume has resulted in yesterday's questionably relentless rally and today's refusal to correct. While we have been bullish the S&P since the index made its low in the 870's we were a little surprised at the magnitude of the rally. That said, we still believe that the S&P will make its way higher, approximately to the 940 area; if this is an accurate assumption, Treasuries should find themselves retesting the May lows and slightly beyond.

Keeping bonds and notes under pressure are assumptions that the U.S. economy is showing signs of recovery. The newest evidence supporting this theory is a statement made by Gary Stern, President of the Minneapolis Fed;

"As we get into the middle of 2010 and beyond, I would expect to see a resumption of healthy growth." He also downplayed the role of deflation, "To date, there is scant evidence of deflation in so-called core measures of inflation." He added, "If economic growth resumes in the United States as I expect, the threat of deflation should diminish commensurately."

You don't need to go to the zoo to see animals, rather look at the common investor and how they maneuver within their portfolio. I'm not talking about giraffes and elephants but rather bulls, bears, pigs and sheep. Bulls make money in a bull market, bears make money in a bear market, pigs are greedy and will lose money in the long run, while sheep are led to the slaughter as they fail to do their own research and just follow the masses. It is crucial to one's investment success to be able to maneuver and recognize changes in trends, to be disciplined, to eliminate fear and greed and to think outside the box. The current market dynamic is challenging and will remain this way for quarters and perhaps years. We suggest investors seek the help of professionals and if they truly are animal lovers watch the discovery channel, go to the zoo or get a pet, but do not invest like an animal.

July corn futures at the Chicago Board of Trade on Wednesday hit a fresh four-month high of $4.34 a bushel. Prices are in a steep three-week-old uptrend on the daily bar chart and the next upside price objective for the bulls is to produce a close above the January high of $4.49 1/4 a bushel. Above that lies strong chart resistance at $4.72 1/4, basis July futures. A close above that chart level would open the door to a challenge of major psychological resistance at $5.00 a bushel. Importantly, should July corn futures post a close above $4.72 1/4, technical resistance levels become fewer and farther between--meaning bigger daily price moves are likely, both on the upside and on the downside.

The recent trade in the Gold market has proved the resiliency of Gold traders. In the past eight months we have traded a $300.00+ range and $20.00 + daily ranges are now common place. There have been many reasons for this trend the Government bail-outs, huge unemployment numbers (9% unemployed) housing foreclosures, and Historic Financial Institutions failing just to name a few.

With the Stock Market falling from the 14000 level to the present 8200 level and Crude Oil dropping From the $147.00 per barrel level to $59.00 per barrel presently it certainly proves the stability of Gold. Gold has certainly been a "flight to safe haven" market for investors. We are presently seeing a sideways to BULLISH trend in my opinion. Despite smaller ranges of late we are still seeing 50.00+ ranges monthly and it appears technically we may have a move to the upside.

The Fed was at it again, but this time they were buying securities on the short end of the yield curve. The Fed purchased $6 billion in fixed income securities maturing in 2012 and 2013 (the realization that these are now considered short-term debt instruments makes me feel old). At the same time, they auctioned $34 billion in 4-week bills.

It was another data challenged session, leaving market direction up to equity market action and of course the Fed. Traders are noting that there don't seem to be as many institutional or large spec traders as there have been in years past and this makes the Fed an even bigger "player" than it may otherwise be. On the other hand, the stock indices pared early morning losses, which worked directly against the Treasury rally. It is clear that the near-term direction of bonds and notes will be highly dependent on the path taken on Wall Street. We are still leaning slightly lower in stocks and higher in bonds but remind traders that it is important to be nimble as circumstances are changing quickly.

The latest advance in stocks and commodities with the fall in treasuries and the US Dollar, could in fact be a precursor of what is to come but the pace of the advances and declines is flawed. These spectacular moves in such a short time are irrational and almost always not true. Stocks are moving higher as investors believe we will start to see a recovery in coming quarters and on hope that the worst is behind us. I'm not convinced on either front just yet. Commodities are rallying for the same reasoning and the fact that inflation may be around the corner. It is undeniable that this is a valid concern but perhaps premature. The move in treasuries is justifiable and for the US government to think they can get global investors to bail them out of this mess by issuing long term obligations and paying 3% is ludicrous. The US dollar is dead and will be considerably lower years from now. Day to day the volatility is unpredictable, however even Warren Buffet recently said 5-10 years from now the US dollar could be considerably lower. Markets tend to move irrationally and to extremes when fear and greed is present and this is never been more apparent across all asset classes. The investor that diversifies their portfolio and can differentiate between perception and reality will come ahead in the long run.

The major stock indices found comfort in alleviating the uncertainty surrounding the stress tests and the employment report. Each event offered overall negative news but also eliminated many suspicions of disastrous scenarios.

With investors looking at a potential depression in the rear-view mirror, the market is approaching a major crossroads. It seems as though the market rallied prior to the streak of better than expected economic numbers and will likely turn over before expectations begin overshooting reality. On the other hand, we are in a scenario that has never been seen before. There is a significant amount of cash on the sidelines and if investors begin fearing that they are missing the boat, dollars could flood the markets for no apparent reason.

July soybean futures at the Chicago Board of Trade on Thursday hit a fresh seven-month high of $11.31 a bushel. Prices are also in a nine-week-old uptrend on the daily bar chart. The bulls have gained solid upside technical momentum recently, and are looking for more on the upside in the near term. The next upside price objective for the powerful soybean market bulls is to produce a close above solid chart resistance at $11.50 a bushel in July futures. Above that lies psychological resistance at $12.00 a bushel. With soybean prices climbing above $11.00 a bushel recently, it also signals to traders that daily price moves are likely to become larger--both on the upside and on the downside--as the price up-trend continues.

Light action and better than expected economic news kept bond and note futures under moderate pressure. While Treasuries spent most of the day in the red, the bearish conviction was weak. Accordingly, I sense that a bottom may be looming. That said, this is a market that is known for violent trend reversals and today's trade certainly wasn't violent. I suspect that we could see some sort of key-reversal low in the coming days that could extend to, or below 120 in the T-bond and the mid 119's in the T-note. Then again, this market has taken on some new characteristics and could be forming a rounding bottom as we speak (likely just to prove us wrong).

Market influences were mixed. The ISM manufacturing index was reported at 43.7, better than the prior reading of 40.8 and expectations for 42. Conversely, a relatively successful action of 1 and 3 year notes seemed to keep a floor under Treasury prices.

For the last year and half we have gotten bad news about the economy and we are now starting to see more favorable news trickle in, the key is to be objective and to look at everything. It seems that all the markets are interconnected as the metals trade with the currencies, energies with equities and all agriculture seems to move together. Observe relationships and follow the flow of money. For instance, we're not in a bull market in stocks but investors who have ignored equities because of a bad experience have missed a huge move, oil inventories are at an 18 year high but oil has moved $9 higher in the last 2 weeks. There is virtually no demand for cotton, yet prices have advanced 40% in the last month. Natural gas prices look cheap, however that was also the case 2 months ago, since then prices have dropped an additional $2. I guess what I'm getting at is don't ignore the good or bad news and be more critical when making decisions in your portfolio.