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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.

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