The hot commodities in 2005 included copper, sugar, orange juice, gold, silver, aluminum, energy, the stock market (that is if you knew which stocks to pick) and even the US dollar. Then there were the not-so-hot: corn, soybeans, wheat, cocoa, coffee, the Yen and, much to Warren Buffett’s dismay, the euro.

As we enter a new year, some of the previously hot commodities are cooling off and others are warming up. Which commodities--or currencies, or stocks--will be the hot tickets for 2006?

There will undoubtedly be surprises by the end of this year because the public usually looks backward, not ahead. However, before we address that question, I’d like to raise a different, equally important question.

What will be necessary to profit in commodities this coming year? The answer: Conditions that will produce sustained market trends with volatility. With the growing economies in China and India, record US trade and budget deficits, diminishing supplies of certain commodities and perhaps a few weather-related moves, the conditions in the commodities and financial futures appear to favor sustained trends and volatility. However, George Soros noted the most important fundamental that will move any market, credit flows. What he meant by this is that market trends are formed by money that for some reason flows into a market.

My personal trading plan is to successfully identify and then capitalize on a market’s trend. There are different ways to approach this, and it’s always good to be aware of the fundamentals of supply and demand. But my decisions are rooted in a technical approach based on indicators such as overbought/oversold, moving averages, open interest, volume, news reactions and relative strength, while evaluating the sentiment & positions of the major players. Additionally, for success it’s vital for a trader to utilize proper risk-control techniques--in this business, we’re dealing with the future. And as Yogi Berra once said, “The future is unknown to an extent.”

I’m concluding this issue by sharing some charts with you. These are the weekly charts of seven markets I’ve targeted for potential new moves or continued bull moves in 2006. In other words, these are seven markets that, as of this writing, I see ending the coming year higher than where they start it. These are macro areas to consider; timing, of course, is critical. This is where my trading service Futures Market Forecaster is most useful.

Wheat (Kansas City)

www.commodity.com

Gold

www.commodity.com

Crude Oil

www.commodity.com

Canadian Dollar

www.commodity.com

Cocoa

www.commodity.com

Soybeans

www.commodity.com

Cotton

www.commodity.com

© 2005 George Kleinman
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Risk Disclaimer

Futures and futures options can entail a high degree of risk and are not appropriate for all investors. Commodities Trends is strictly the opinion of its writer. Use it as a valuable tool, not the "Holy Grail." Any actions taken by readers are for their own account and risk. Information is obtained from sources believed reliable, but is in no way guaranteed. The author may have positions in the markets mentioned including at times positions contrary to the advice quoted herein. Opinions, market data and recommendations are subject to change at any time. Past Results Are Not Necessarily Indicative of Future Results.

Hypothetical Performance

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.