For reasons I’ve reiterated for nearly a year now (ethanol and exports), I expect to see July corn trading with a “five” in front of it before it goes off the board. Last week, July corn registered a new high close and there’s nothing bearish about that. Technically, a bull flag has recently been completed.

The rule is the next move will carry the market at least as high as the length of the “flagpole.” The flagpole--point “a” to point “b” in the chart below--measures 67 cents, so the conclusion is a 67-cent move from point “c” projects a minimum move to 477.

The trend is your friend here.

July Corn



Source: Commodity.com

Sugar

Last week, I flashed a fresh buy signal for sugar to my Futures Market Forecaster subscribers.

The first clue to a potential bottom here was the February 12 volume spike. I’ve long observed that a large-volume day (volume 50 percent greater than the 60-day average) precedes major trend changes. The second clue was a gap up (not filled) last Thursday (labeled “BA” on the chart below); I take this for a bullish breakaway gap, and many times these formations mark the jump-start of the big moves.

Large trading funds remain net short, but the market is in a bullish configuration with the near-month trading at a premium to the back months (this indicates tightening supplies). When the short covering begins in earnest, there just could be a sweet rally here.

March Sugar



Source: Commodity.com

Cotton

Cotton remains the cheapest commodity on the board, relatively speaking. December cotton hit contract lows last week--much to my surprise, because December cotton is “new crop,” not even planted yet. You’d think with corn and soybeans and just about any other crop suitable for planting on cotton ground generating a much higher money return, farmers would opt to plant less cotton this coming year.

Less cotton should mean higher prices longer term. I don’t advocate bottom-picking. Even though this market appears “cheap,” rather than just buying and holding, I’ll wait for a technical sign of a bottom before stepping in.

Open interest (OI)--the number of outstanding contracts--is showing an interesting configuration, however (the red line on the chart below). Note how OI began to drop last week after hitting a new high recently. This is a potential sign the smart money (these would be the shorts; after all, they’ve been right to this point) are starting to quietly liquidate their positions. The old, weak longs are also liquidating, throwing in the towel, so to speak. This is a potentially bullish sign, so we’re keeping cotton on our radar.

December Cotton



Source: Commodity.com

Nickel

Here’s a chart you don’t see very often: nickel. Is this a beautiful chart or what?

Nickel, which trades on the London Metal Exchange, isn’t on the radar of most traders, but it hit an all-time high last week, close to $40,000 per ton--almost triple the price of a year ago. Nickel is used to make stainless steel, used in all kinds of consumer products.

I guess the nickel market is telling us the economy must be OK right now.

LME Nickel



Source: Commodity.com

That’s all this week from the trading desk.

Good luck and good trading.

George Kleinman is editor of Commodities Trends.

© 2007 George Kleinman
Editor of Commodities Trends
Editorial Archive

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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.

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