This week we saw CPI come out largely as expected. This really took the wind out of the sails of those who expected a rate hike or cut for that matter. We continue to argue that the FOMC will do nothing for the balance of the year as they still need more time for the markets to digest what they have already done. Look for the Dollar to continue to drift in an overall sideways fashion this week.
Stocks continue to rally even after we have finished earning season. There is a ton of money chasing this market and until all that money is allocated stocks should continue to move higher. Wee see the S&P reaching new highs before the end of this month.
Bonds have sold off as we forecasted last week and we are now trading below 111. The 111 puts that we recommended last week have almost doubled in value. We continue to target a move towards 110 this week.
Energy markets have been very erratic lately. With all the problems coming out of Nigeria and the continued strong demand for Crude and gasoline should continue to push these markets higher over the near term. We should see crude oil hit $65 again before any major pullback. Natural gas is still fighting with resistance at 8.00, which at this point looks like it will hold.
Gold is also still selling off and we expect the metal to fall briefly below 650 in the near term. Copper has seen another dramatic pullback but has now found support at the 350 level. We see this market turning back up by months end but are likely to drift for the week ahead. Silver found support at 13.00 and for the week ahead we expect that support to hold up. We see a range bound market for the week ahead with the low being 13.00 and the highs being near 13.50.
Soybeans are moving up as we expected and we are targeting a move to and through 8.00 in the near term. Wheat too remains strong and should easily climb back above 5.00 this week, after which the next target will be 5.25. Corn remains down and with all the acreage planted this year we still see a move back towards 3.25 for this market. Long wheat and short corn looks like an attractive spread trade going forward.
OJ is still struggling with the 170 resistance level mentioned in past issues. We are accumulating July 160 puts and still targeting s move back to 150. Cocoa is still on its way towards 2000, buy dips. Coffee is closing in on our 107.50 buy signal that we mentioned last week. We will be buying 110 calls rather than futures as there is still a high chance that this rally could fail. Sugar, continues to be dumped overboard. This market cannot seem to find bottom. We will continue to stand aside this market until we see a solid turn around that last at least a week before entering the long side. Cotton, like sugar, is also getting pushed lower almost every day. We will continue to side step this market and wait for a turn higher that last over a week before even thinking about going long.
The cattle complex turned up last week but we are running into overhead resistance that should stall this rally. 110 in Feeder cattle is solid resistance that should cap this rally and 94.50 is resistance on the live cattle. Hogs are still drifting lower with little overall directional bias in the near term. Pork bellies ran back up to resistance at 105 and that should also stall this rally. Look for overall lower meat prices as the week grinds on.
by Derek Frey
Odom & Frey
Call us at 1-866-636-6378