Jurgens Bauer’s Daily Soft Market Comments
In contrast to recent bearish price action the soft markets all blasted off upward in Monday’s trading. The sharply weaker dollar, combined with stronger equities and firmer oil prices encouraged short covering and attracted some fresh buying into the soft markets. Having already been stoked by tales that large index funds have liquidated positions in preparation for January redemption’s, and that the pressure from such liquidations has abated, values of most commodity markets rebounded causing some to question whether a bottom is near.
I agree that commodities have been over done on the downside and have been talking about the vulnerability to bouts of short covering for some time now. Today was one of those days. These markets may continue to correct from oversold conditions, so be mindful. Watch for stop hunting.
Serious traders are concerned over the relative thin conditions that exist which sets the tone for fueling additional short covering, but stops may also be near underneath should prices fail to follow through.
Economic conditions haven’t improved and the situation remains scary for many. As a result there are a lot of producers looking to raise cash. The volatility seen in these markets warrants attention and makes it difficult to see the potential to sell options. Instead owning options makes prudent sense especially when you can limit your risk.
I do not trust one day of strength amidst bear market conditions. The short side doesn’t disappear overnight. So while the attention and glamor seen from today’s action be wary and know that in most cases the trend is still down. Therefore, I look to give long puts a try on any further upside push.
Coffee: Support: 106.75-106.50, 105.1, 104, 102 Resistance:110.75, 111.35, 114.50
Cocoa: Support: 2200, 2120 Resist: 2310-2320, 2410-2420
Sugar Support: 1121-1110, 1080, 1060-1044, Resist: 1144-1152, 1188-1200
Cotton Support: 4300-4280, 4100, Resist: 4540-4560, 4605, 4750
I welcome your comments
Jurgens H. Bauer
