Jurgens Bauer’s Soft Commodity Comments for December 11th, 2008
Last night I did some reviewing of weekly charts and feel that there is evidence building in favor of the bulls. The key, however will be the action in the dollar. One day, down the road I think, the dollar will again weaken and that will benefit soft market prices. We did see a weaker dollar today, and that combined with the rally in crude prices, led to gains across the board. The oil market is fuelig moves in other commodities and softs are no exception. That continued evidence that we do not trade in a vacuum leads me to be wary of this latest move up.
I like cocoa, I do not trust the long side in cotton, coffee or sugar still. I continue to think the short side will again receive attention. I suspect crazy thin trading action to dictate until at least year’s end. Markets will provide opportunity, but profits should be realized quickly cause they can easily disappear. Therefore, I advise keeping positions small and flexible. I continue to feel long volatility, (long options) is the best method of approach regardless of which side you play from.
While bearish in my head towards the coffee, cotton and sugar, I am begining to have a sense that bulish seeds are being planted. timing will be the key and I do not see now as the time to get bullish. The markets are reacting via short covering bouts to that oversold condition, but we are not out of the woods yet.
Where is demand?
Demand is the key and for cotton I just don’t see any. Sugar has abundant supplies and coffee, well fundamentals are building in favor of a bullish posture, but it isn’t trading on its own merits.
This morning soft markets are responding to a weaker dollar and may gain strength should other outside influences provide positives, yet I still think the time to be overtly bullish is a ways away. Watch trend lines.
Jurgens H. Bauer
