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Random Thoughts: Is a Commodity Bounce Coming?

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Bulls hope crude and gold can catch a wave higher.

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Editor's Note: The following content was posted in real time on the Buzz & Banter. It is being shared here for the benefit of the Minyanville community.


Gate Sniffage - 9:30 am

Yesterday we mapped the recipe for a Turnaround Tuesday (higher commodities, lower equities). While crude $110 and S&P 1330-1350 would have been optimal turning points for a trade--and still might be, with time--I set up partial positions yesterday with this construct in mind. Pure trades, my friends, and we'll walk the path together.

Some Random Vibes:

  • Current vehicles include American Express (AXP) puts (into $40), JP Morgan (JPM) puts (pure vehicle and held for sale), a smattering of GLD calls (pure trade in the context of being constructive on the dollar) and energy plays such as USO, Transocean (RIG) and Weatherford (WFT) calls.

  • You'll notice that I didn't slap on S&P downside exposure as I wanna wait until a tighter and more defined technical context presents itself.

  • I'm still operating with a "hit it to quit it" mentality. Sometimes that'll look like a jab, other times it'll be a roundhouse and still others, I'll dance with hopes of finding on opening, all the while keeping my right hand up.

  • Jeez, what happened to the Spankees?

  • Would you really be that surprised if the SEC unleashes another assault on short-sellers?

  • Why didn't they target the buyers at S&P 1500?

  • Georgia, Georgia... British Pete shuttered a pipeline responsible for 90,000 barrels per day. That may not have "mattered" at crude $145 but perhaps it does at $115.

  • Good luck Minyans--trade like a Phelps today!


Muse and Views! - 10:22 am

  • Whispering "buy dips and sell blips" to myself, I've made partial sales this morning of my JP Morgan (JPM) puts and American Express (AXP) puts--the former trades heavier than expected, the latter better than I would have thought--and I peeled out of some Transocean (RIG) calls into strength. Just trading.

  • The energy exposure I added yesterday were starter positions with an eye towards crude $110. If crude opened at that level this morning, I would have been early (again) but I traded "in between" as a function of price. So it's said, I still think we could get to that level (where I would be a buyer for a trade).

  • Green beans in a red sea? Baidu (BIDU) (it filled the aforementioned gap), the semis, automobiles (automobiles?), Wal-Mart (WMT) and Sears (SHLD) (where President Fish buys his clothes) and select pharma.

  • And, of course, there's the general "N's over S's" vibe as the piggies poke lower.

  • Gold, meanwhile, continues to get beaten with an ugly stick. I'll tell ya, there's something to that Mr. T Gold indicator!

  • While I'm "dollar bullish," I also started a small GLD call position yesterday for the turnaround vibe. Thus far, that trade isn't making it to my A-Team.

  • I'll be back.


Answers I Really Wanna Know... - 10:41 am

  • Are the 3% haircuts in the banks and brokers all you need to know for Turnaround Tuesday's equity direction?

  • Is a trade lower into crude $110 the best thing that can happen for energy bulls?

  • Now that we're getting there (crude 112ish), aren't you glad you kept some dry powder?

  • Did you know that the 10-year correlation between crude and the S&P is -0.041?

  • In other words, there's NO historical correlation?

  • Crazy, eh?

  • Are Cheech & Chong a bear market indicator?

  • Do you see how dry Wells Fargo (WFC) is trading relative to its peers?

  • If you loved gold at $1050, isn't it a bargain as it approaches a 7-handle?

  • Or has something (namely the dollar) structurally shifted?

  • Doesn't the answer to that question reside in the time horizon you're using?

  • In other words, why can't we be bullish on gold for a trade and bullish on the dollar through a longer-term lens? (Hand raised.)

  • Is societal acrimony humor deflation?


R.P.

Positions in AXP, GLD, JPM, RIG, USO, WFT

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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