KEY TERMS
OVB: Outside Vertical Bar
VRCB: Volatility Reduced Compression Bar
Core Position: $50,000,000
PowerShares DB Agriculture (DBA):
08/17/2012 Closing Price: 29.76
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: SHORT @ 29.70 on 08/13/12; STOP @ 30.24
Break-Even: 28.96; Cover 10%
Current Downside Targets = 27.94 – 27.40
Projected Weekly Range: .54
Trading 185,000 Shares
I.T. ANALYSIS:
- Initial trade risk was $138,750 or .28%. Current trade risk is $99,900 or .20%.
- DBA is a comprehensive agricultural ETF. Holdings include fairly equally-weighted futures contracts in sugar #11, live cattle, corn, soybeans, cocoa, coffee, lean hogs, wheat, and cattle feeder.
- Flat/slightly higher, stop = 30.24,
- DBA has now formed three consecutive VRCBs, a pattern occurring less than .2% of the time. This is caused by a steady reduction in weekly ranges and extremely restricted volatility. VRCBs normally form at tops and bottoms, where buyers and sellers balance each other out. We view this as a change in directional movement; in the case of DBA, sellers have recently overpowered the bulls. This coming week should see flat or slightly higher movement although we doubt a large technical breakout will occur. Price action was bearish last week yet Friday’s rally and close above the weekly midrange are bullish indicators for this week’s trading.
iPath DJ-UBS Grains (JJG):
08/17/2012 Closing Price: 62.10
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT
Working Orders: LONG @ 62.25; STOP @ 60.05
Current Upside Target = 70.95
Projected Weekly Range: 2.77
Trading 87,000 Shares
I.T. ANALYSIS:
- JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
- Bull flag, long @ 62.25
- JJG is in the fifth week of forming a bull flag, a pattern where weekly movement remains within a concentrated range following a significant upward move. The previous week’s OVB pattern failed to follow through with the low being exceeded before the high. After Tuesday violated the OVB low, JJG rallied higher, closing in the top 7% of the weekly range. The reduced weekly range resulted in a VRCB, a bar pattern that allows for low risk entries. Paired with the strong close and exceptionally strong bullish trend, we believe prices will move toward our upside target within the near trading term. We have placed a long entry at 62.25 and a stop order at 60.05.
SPDR Gold Shares (GLD):
08/17/2012 Closing Price: 156.72
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: FLAT
Working Orders: LONG @ 155.73; STOP @ 153.60
Break-Even Price: 157.86; Cover 20%
Current Upside Target = 165.88
Projected Weekly Range: 2.94
Trading 35,000 Shares
I.T. ANALYSIS:
- Upcoming initial trade risk is $74,550 or .15%.
- GLD’s single holding is gold bullion.
- The sideways bear flag pattern continued last week. The previous 11 weeks have remained within the range of one week’s high and low, indicating very strong support around 148.50 and resistance near 158.50. Trading has been testing the 158 resistance level over the past seven weeks while falling just short of breaking through it. We strongly believe the next breakout will be to the upside because a 90% probability of trading 157.97 before 152.19 still exists. A weekly close above 159.20 indicates an I.T. higher bottom and will reverse the trend to bullish. This is significantly more likely to occur than retesting 2012 lows.
08/17/2012 Closing Price: 43.39
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: FLAT.
Working Orders: BUY @ 43.47; REVERSAL STOP @ 42.29
Upcoming Break-Even Price: 44.94; Cover 20%
Current Upside Target = 47.91
Projected Weekly Range: 1.49
Trading 128,000 Shares
I.T. ANALYSIS:
- Upcoming initial trade risk is $188,160 or .38%.
- JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
- JJC has formed a VRCB for the second week in row with nearly equal highs and lows. Price action was bearish divergent, exhibiting a lower high and lower low yet a very strong bullish close, indicating 43.47 should be traded Monday. 43.47 is our revised long entry price with 42.29 as the new reversal stop. A strong support area has formed around the 41.70 area. If this area fails to support our upcoming trade we believe the bottom will be retested and fail, entering a trend-supported short position.
United States Oil (USO):
08/17/2012 Closing Price: 35.95
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: FLAT
Current Upside Target = 35.85 – 37.87*Extended Upside Objective
Projected Weekly Range: 1.61
Trading 159,000 Shares
I.T. ANALYSIS:
- USO seeks to replicate the spot price of WTI light, sweet crude oil and primarily holds futures contracts.
- USO met 100% of our upside target last week and after further evaluation, we are issuing a higher extended price target of 37.87. The counter-trend rally continued last week as it closed at the weekly high, 35.95. Buying pressure rallied prices above 35.66, indicating 50% of the previous top to bottom correction had been regained. Relative strength, momentum and price action all display bullish characteristics that has led this market off of its yearly lows. We do believe, however, that this rally will fail before retesting the previous top, 42.30, where short entry positions will be taken.
United States Natural Gas (UNG):
08/17/2012 Closing Price: 18.71
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: SHORT @ 20.39 on 08/09/12. STOP @ 21.36
Break-Even Price: 18.35; Cover 20%
Current Downside Targets = 17.27 – 16.36
Projected Weekly Range: 2.12
Trading 100,000 Shares
I.T. ANALYSIS:
- Initial trade risk was $204,000 or .41%. Current trade risk is $97,000 or .19%. Current trade profits are $168,000 or .34%.
- UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
- Although UNG experienced a lower than average trading range, price action and close confirmation was clearly bearish. A higher top was formed by trading 18.88 last week, while Friday’s close at 18.71 confirmed the pattern. UNG formed a VRCB last week, remaining within a trading range of only 1.11. This VRCB could indicate the correction is losing momentum or that the general market is experiencing a lack of volatility after large declines during the previous two weeks, or possibly both. The I.T. trend is still bullish and we believe this correction will stop within our downside price target range. Our break-even price of 18.35 was within three cents last week; look to cover 20% at this price.
08/17/2012 Closing Price: 122.59
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bearish.
Current Position: LONG @ 122.23 on 08/09/12. STOP @ 121.70
Break-Even Price: 124.74; Cover 20%
Current Upside Target = 125.59
Projected Weekly Range: 1.86
Trading 100,000 Shares
I.T. ANALYSIS:
- Initial trade risk was $251,000 or .50%. Current trade risk is $53,000 or .11%. Current trade profits are $36,000 or .07%.
- FXE seeks to track the movement of the Euro currency.
- FXE gave very little feedback last week as volatility and price action were both nondirectional. Total trading range was 1.08 last week, the lowest in over two years, forming a VRCB. The lower high and higher low paired with a close near the midrange indicate very little for future price action. 121.70 is an important number to watch this week; not only will it stop out our trade but will also confirm a top, signaling the rally is over. We would like to see our upside price objective achieved before entering a short position, although with such a weak euro, this I.T. rally may be all we can get.
iShares MSCI Emerging Markets Index (EEM):
08/17/2012 Closing Price: 40.47
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Working Orders: SHORT @ 39.97; STOP @ 40.79
Current Upside Target = 42.48
Projected Weekly Range: .98
Trading 135,000 Shares
I.T. ANALYSIS:
- Upcoming initial trade risk is $110,700 or .22%.
- EEM seeks to replicate the performance of the MSCI Emerging Markets Index by investing in the underlying international securities.
- Emerging markets struggled to establish any form of directional movement last week. Price action was null with a lower high and higher low; Friday’s close was near the weekly midrange. For the second week in a row, a VRCB has formed at the top of the current rally. Prices seem to be encountering heavy resistance, making new highs of less than 1.00 in the last 9 weeks. 40.73 marks the 50% rally price from the previous top to bottom correction. We believe this is a strong resistance price and that current market conditions will prevent a 100% rally. If trading is higher this week, we will continue look to enter a short position.
SPDR S&P 500 (SPY):
08/17/2012 Closing Price: 142.18
INTERMEDIATE TERM (I.T.) SIGNAL:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Targets: 145.55 – 147.05
Projected Weekly Range: 2.56
Trading 39,000 Shares
I.T. ANALYSIS:
- SPY made new four-year highs last week and showed very bullish price action. The higher high and higher low indicates trading should be up this week, closing in the upper 10% and above the previous week’s high confirm the trend. Our conservative price objective should be achieved by the end of August; if momentum and strong closes continue, look for 147.05. The channel system that has seen 98% of the last 11 week’s trading range has failed the last two weeks. Although we believe only a low probability exists, if a correction does begin, look for 135.85. Long entry positions will follow any correction of at least 8 points.
