SAMPLE. Weekly Commodity Trading Letter A Comprehensive Guide to Trends, Timing, Cycles and Seasonals in Futures

Since 1972 Vol 2008 Issue 48 III Jake Bernstein’s Weekly Commodity Trading Letter A Comprehensive Guide to Trends, Timing, Cycles and Seasonals in F...
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Since 1972 Vol 2008 Issue 48

III

Jake Bernstein’s Weekly Commodity Trading Letter A Comprehensive Guide to Trends, Timing, Cycles and Seasonals in Futures For the Week Beginning 1 December 2008

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A New Model of the Trading Universe

In 1914 the Russian philosopher P D Ouspensky authored his groundbreaking work entitled A New Model of the Universe in which he explained his views on the various relationships between different schools of thought, mysticism and the pragmatic world. Whether we agree with his point of view or not, Ouspensky’s work still stands today as a classic in philosophical thought. While not even remotely on the same level as Ouspensky’s work, I believe that my research and application of market patterns presents a much-needed and timely new model for the trading universe. What I am saying is not hubris, rather it is reality necessitated by a paradigm shift in the markets. The days of 300-400 point ranges in S&P futures may well be gone forever given the economic realities of our time. Volatility is unprecedented. World debt is unprecedented. Economies and markets sit on the edge of a cliff. Will the markets survive? Will the world fall into a deep depression? Will interest rates go effectively to zero? Will corporate and consumer bankruptcies soar to record levels? Will the real estate markets collapse? Will governments print their way out of crisis by inflating currencies? There are hundreds of questions and relatively few answers. There are many things we don’t know about the markets but there are a few things we know well. What do we know? Patterns

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Are Commodities Dead or is there a NEW and MORE POWERFUL RALLY coming? Can gold hit $2200? Will grains surge back to all time highs or higher? Will the “experts” be wrong again? Are we headed for a hyper inflation or a depression?

I have long believed that patterns are the ultimate underlying truth of the markets. Patterns persist and have shown themselves to be valid over many times. Whether these patterns are seasonal or indicator based, they are persistent provided they are valid. Valid is the operative word. Many of the traditional chart patterns such as flags, pennants, trend lines, head-and-shoulders, Gann and Elliott, Fibonacci and many others are neither totally objective. As such they become a matter of art and opinion as opposed to a matter of methodology and specificity. On the other hand, there are some patterns that are clear, specific, time-tested and they have a lengthy history of reliability. Many matters in the markets are opinions but only a few indicators are matters of fact. What further complicates matters is that back tested indicators will always be questioned on the basis of statistical methodology while subjective indicators will always be defended on the basis of anecdotal reports. Ultimately the proof of the market pudding will be in the tasting. What I have Done

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Have I gone crazy again? Did you think I was out of my mind when I warned you about the Greatest Bubble in commodity history? Did you think I was wrong when I predicted 60% corrections or more? Join me for 2 hours on Saturday 6 December for my most important Webinar of the year – possibly my most specific and timely forecasts ever. For additional information or reservations call 800-678-5253 or 831-430-0600

Massive market volatility has, in many cases, rendered once tenuous market concepts and indicators essentially useless. Old ways of thought have been shattered and it has become evident to me that market patterns and inter-relationships are more important than prices alone. The fact that a stock or commodity market closes higher today than yesterday tells us nothing about how it got there. A higher close after a huge opening decline is, to my way of thinking, more important than a mere higher close. Several days of closes higher than opens is more significant than a “key reversal” or a simple one day reversal. A new 16 day high is more important to me than a close above a 50 day or 200 day moving average. And these few examples are only a small sample of the relationships and patterns that I consider to be important. I have taken my best patterns and compiled them into an index that I call the Bernstein Trend Index (BTI). The BTI is a cumulative index. It looks at a number of price and indicator relationships every day, assigns them weights and yields an index value. The index values are cumulative. When plotted on a chart the BTI provides what is, in my view, a more valid representation The charts in this issue show my BTI as a trend indicator and as a timing indicator. (Continued on page 7) © 2008 Network Press Inc. PO Box 66767 Scotts Valley CA. 95066 USA 800-678-5253 831-430-0600 FAX 831-430-0900 Email: [email protected]

Jake Bernstein’s Weekly Commodity Trading Letter COWS (Corn, Oats, Wheat and Soybeans)

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The grain and soybean complex markets are beginning to find some degree support on some of my indicators but still read bearish on the BTI. I advised prior to the declines that the record-breaking rallies would end. And they did. The bubble has burst as predicted and declines have been huge, also as predicted. We are in the ideal time frame for seasonal lows in the soybean complex as well as in corn. I have given you a short term, high-risk buy signal on March corn via the hotline. NOTE: I will be giving you SPREAD recommendations in the grain and soybean complex markets provided that risk levels are reasonable. See the BTI trend charts below. ATTEND MY WEBINAR on 6 December and find out where I believe the grain and bean markets are going.

Soybean Complex: I alerted you of the bearish trends and potentially large corrections before they started. The corrections have

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come and some short-term buy triggers have developed in some cases but the BTI, an intermediate term indicator, is still bearish. The seasonals were ideally BEARISH until late October which meant that we were getting close to lows. The charts below illustrate my assessment of current signals and indicators. Soybeans have given a high-risk trigger to go long but with HUGE volatility. I emphasize the “high risk” aspect of all grain and soybean market trades. I will be recommending spreads very soon via daily hotline. Corn: Prior to the current declines I pointed out that my COT analysis had turned bearish. Seasonal lows are now due. There is bullish momentum divergence. The hotline has given you a specific short-term recommendation to buy at or near support. I believe that corn prices now have the potential to make a very large recovery, perhaps to as high as intermediate term resistance areas. The hotline has recommended a long on the recent buy signal. Await corn spread recommendations as well. See BTI trend (chart below) is bearish. Wheat: I advised you “the short term trend may bottom within days, while weekly the trend remains bearish”. We saw signs of bullish life last week in the form of a huge recovery. There were short-term buy signals. Await wheat spread recommendations. As in all the grain and soy complex markets, the swings in wheat will continue to be large and wild. A small stop loss in such an environment will only work against you. My weekly COT Analysis newsletter pointed out the very bullish implications of large Commercial long positions. The BTI trend chart shown below remains bearish. Oats: The market remains short term bearish. The intermediate-term uptrend remains bullish. The decline has taken prices down to important support. There are no long-term sell signals on my indicators. There are no short-term buy signals. BTI is bearish. IMPORTANT REMINDER: ALL RECOMMENDATONS GIVEN VIA THE HOTLINE WILL REQUIRE LARGE STOP LOSSES DUE TO ONGOING MARKET VOLATILITY. THERE HAS NEVER BEEN A TIME AS VOLATILE AS THIS – YOU WILL LOSE MONEY IF YOU USE SMALL STOPS IF YOU CAN’T AFFORD THE POTENTIAL RISK THEN DON’T TRADE

© 2008 Network Press Inc. PO Box 66767 Scotts Valley CA. 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

Jake Bernstein’s Weekly Commodity Trading Letter

Cattle and Hogs: My analysis of the COT Commercials positions in both markets continues to project a LONG TERM bull move in both of the meats. I believe that the recent decline in hogs constitutes a good test of my bullish LONG TERM forecast. The seasonals were marginally effective this year. On a spread basis I believe that hogs are undervalued relative to cattle. Hogs futures were close to a short term buy signal and they have triggered. The last few weeks were expected to be bullish for hog prices if the seasonals are on course. The hotline recommended a long in Feb hogs that reached its first profit target and should have been closed out as recommended. The BTI, however is still bearish as of its last signal (see chart at right). NOTE that the BTI is not a short-term indicator as I am using it on the charts in this issue!

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Metals

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Page 3 of 8 Meats

Copper: There are no long-term sell signals as of this writing. Thin volume and erratic price moves make this a difficult market to trade. Therefore, I will not be giving specific hotline recommendations due to intraday volatility and risk. The trend remains bearish. Seasonal lows are ideally due in December. The BTI/MA chart below remains bearish. Gold and Silver: Gold seasonals fulfilled their projected seasonal rally and you should have gotten out of longs. Short term trends in both gold and silver exploded to the upside, however, the ideal seasonal tendency was lower and prices then fell sharply also as I warned you about prior to the fact.

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There is no change in the short term down trend as of this writing in spite of significant attempts to rally on economic weakness. My longer-term work now suggests a $2000+ target once the current decline and cycle low are in place. I believe that the economic bailout packages all over the world will eventually lead to a huge inflationary trend in which commodity prices could soar as currencies inflate and lose real value. That will be the next major economic hurdle. The panic selling in stocks worldwide combined with the anticipated financial crises should have taken gold and even silver to new all time highs. But because they DID NOT DO SO, I warned you that this was bearish for the precious metals. The BTI/MA chart at left shows that silver futures remain in an intermediate term bearish trend with no indication of a short term low at this time.

Platinum/Palladium: My long-term forecasts for platinum and palladium have been bullish and I am still long term bullish in spite of the recent corrections down which were clearly discussed in this newsletter well in advance. The severe corrective declines were long overdue and are, in my view, a positive development in the long-term picture. There are some signs of bullish life I platinum. I continue to advise holding longterm positions.

© 2008 Network Press Inc. PO Box 66767 Scotts Valley CA 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

Jake Bernstein’s Weekly Commodity Trading Letter Currencies

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A brief rally developed was expected but the major trend remains bearish. A short-term dollar sell signal has developed. The BTI/MA trend remains down (see chart at right).

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Eurocurrency/Swiss Franc: There were persistent and significant warnings (and persistent ones at that) on my work of a major low in the US dollar vs. the Swiss and the Euro. Short-term lows were expected to develop and they did, however, as the BTI chart for the US dollar shows, the major trend remains up. There is no change in my longterm bearish expectation. The dollar has surged as expected. I remain bullish on the dollar, however, a short-term top in the dollar was expected and it has developed (see comments below).

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Aussie $: I advised you well ahead of the fact that a MAJOR decline that was coming. The decline has been devastating to the bulls. The market has literally crashed against the US dollar. I told you that it was “not unreasonable to expect a short term low”.

Japanese Yen: I have been bullish for many months and I REMAIN BULLISH. I predicted without any hedging that the Yen would become one of the strongest currencies in the world. It has done so. The long-term bull market continues as predicted. The Yen has exploded against many currencies as predicted. A short-term top has developed in the US dollar but there are no sell signals in the Yen. I have been and I remain bullish on Yen vs. US Dollar. The market has confirmed my bullish forecasts and it done so very strongly.

US Dollar: The dollar gave me clear technical

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evidence that was expected to mark the beginning of the end to this bear market. A short-term top is being made but there are no clear cut sells triggers as of this writing. The dollar is now at long-term resistance which is why there has been some hesitation. The hotline recommended a sell that should have been closed out quickly as recommended as a profit. See BTI/MA chart at right.

Canadian$: I have good technical and cyclical reasons to conclude that an important top has been made in the Canadian dollar vs. the US dollar. Divergence gave clear warnings of a top or, at the minimum, a considerable downside correction. Note how the BTI/MA remained bearish even during the sideways move in August.

BrPound: The market has made an approximate 8.1-year cycle top as predicted. I am still bearish consistent with the long-term cycle projection. The market validated by bearish stance but the bear market is not over yet in spite of the fact that a short-term rally developed US Dollar Index: The hotline recommended a short sale that should have been closed out at a profit in several days. © 2008 Network Press Inc. PO Box 66767 Scotts Valley CA. 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

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Jake Bernstein’s Weekly Commodity Trading Letter Tropicals .

Orange Juice:. There are NO buy triggers as of this writing. Prices continued to fall sharply in sympathy with ongoing and persistent declines in many other markets. I continue to wait for buy triggers that could come at any time. My cyclical work suggested that lows are well overdue. I advise you to wait for divergence buy triggers. See BTI chart at left.

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Sugar: My analysis of the long-term sugar data suggested that the major cycle, which has averaged approximately 7 years, low to low turned bullish. Short term buy signals developed and the price surge has been excellent. I recommended waiting to buy on a decline to short term (daily) support. The market is likely to bottom near or at long-term support in sympathy with the overall crash in commodities. A short-term buy signal has developed. See also BTI chart at lower left. Coffee: My long-term cycles continue to tell me that coffee prices are overdue for a major rally that could take prices much higher over the next few months. Coffee is in a major bull market still in its early stages and it has recently tested short-term support. Coffee is a very volatile market that requires considerable risk. Large stops that must be used or you will be stopped out quickly and often.

Cocoa: My forecast has been bullish and it remains so. My forecast has been correct. The major bull market that I predicted many months ago remains intact. Prices surged sharply higher as predicted many weeks ago, however, a test of support is now developing, ALSO AS EXPECTED. The long-term trend remains bullish.

Fibers

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Cotton: My previous comments were as follows “In spite of the recent strength in sympathy with the grain and soybean complex the technical picture is still NOT convincingly positive. I remain neutral to short term bearish. A short term low is developing but there are no buy triggers as yet. See chart at left. As you can see, the BTI remains bearish.

.Lumber: Based on my analysis of the cycles, trend, timing and COT data, I advised you that lumber is positioned what could very well be the first stages of a record-breaking price rally. The chart shows that a buy trigger has occurred. I believe that a long-term bull market is imminent. No matter what I say it is utterly imperative to WAIT FOR A TRIGGER! That trigger has been made on a daily basis. The market has made new lows for the move but the cycles and my COT studies continue to give advance indications of a major low in the offing. There are indications that a short term low is developing. With lumber prices now so low producers will slow down or completely stop production and this may be the first indication of a major low based on the fundamentals.

© 2008 Network Press Inc. PO Box 66767 Scotts Valley CA 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

I believe that the next major move in US interest rates will be to the upside. My expectation and forecast are based on the 50-60 year long term cycle which now points to higher rates. The flight to quality this week shot futures up to very high levels consistent with seasonals. The financial rescue plan will likely result in huge interest rate increases. Seasonal trend continues bullish. The BTI chart at right shows that a buy trigger has developed. And this is consistent with the short-term seasonal trend.

Stocks

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Based on my cycles work, I advised you that the odds favored a significant low in the US stock market by the end of 2008. I was clear and specific in my advice to go long on the close of trading 27 October. I showed you the history of this seasonal back to 1901! S&P futures surged to the upside. Stock market lows were deemed likely in late October based on seasonals were initially correct. My comments on page 1 of this newsletter prior to the current 5 day rally was very clear about the possible pre Thanksgiving rally. And we have not seen the largest 5-day Dow Jones rally since the 1930’s.

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Jake Bernstein’s Weekly Commodity Trading Letter Interest Rates

While opportunities to buy quality stocks at very low prices will be and are fantastic, you must wait for timing triggers or you must be willing to dollar cost average into quality stocks over the next few months. Wait for weekly buy triggers in order to be more certain of lows and if you are an investor as opposed to a short-term trader. There has been yet another divergence buy trigger for S&P. Remember that the bottoming prices after such a large decline is not a tame event but rather one marked by large volatility. The BTI at right remains bearish, however.

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Energies

The energy futures markets collapsed following a period of excessive bullish sentiment and runaway bull move. Efforts by OPEC to shore up prices by lowering production will likely have only a minimal or limited impact as has been the case in the past. I believe that short-term lows are likely very soon. The natural gas market has more upside potential on an intermediate and long-term basis than either unleaded gas or crude oil. The daily charts have shown bullish divergence and have, in some cases, triggered. Nonetheless, the intermediate term trend as shown by the BTI chart at right, remains bearish. Given the length and severity of the decline in all energies the odds of a major recovery rally are significant. I do not believe that these bull markets are over as yet and I suspect that a rally back to the $90 level is very possible. Wait for BTI to turn bullish. © 2008 Network Press Inc. PO Box 66767 Scotts Valley CA. 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

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Jake Bernstein’s Weekly Commodity Trading Letter

A New Trading Model….(Cont’d from page 1) Using the BTI concept I created an indicator that is, in my view, relatively immune to many of the random and volatile market moves that are a “tale full of sound and fury” but which signify nothing. I have shown the BTI on the charts in this issue. There are several ways in which the BTI can be used. Here are some of the applications with examples shown on charts on this page and on page 8.

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1) BTI as a trend indicator is stable and not reactive to small or even large counter trend moves that usually turn out to be nothing significant in the bigger picture. Consider the chart below and see my notes.

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2) BTI can be run as a 2nd order MA method. In this case the two lines shown are each MA’s of the BTI. Signals are generated with the MA of the BTI crosses the MA of the BTI/MA:

© 2008 Network Press Inc. PO Box 66767 Scotts Valley CA 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

Jake Bernstein’s Weekly Commodity Trading Letter

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And finally, I have also taken the BTI indicator and combined it with an MA, a profit target, a stop loss and a trailing stop and I have developed it into a trading system. Here are some signals generated by the BTI system (see chart below). Note that the BTI is not intended to serve as a short term trading system. I have designed it to capture longer trends and to stay with these trends as long as possible. See my notes below.

THERE IS A RISK OF LOSS IN FUTURES TRADING Comments in this letter are subject to change as a function of market conditions. Recommendations are given via hotline, fax, e-mail, Internet or tape updates. Standard Subscription Rates: □ Annually $895 □ Semi-Annually $495 □ Quarterly $295

Network Press, Inc., (NPI) publishes Jake Bernstein’s Weekly Commodity Trading Letter as a service to their clients only. The information contained herein is subject to change without notice and has been obtained from sources believed to be reliable, but it is not guaranteed as to its accuracy or completeness. Those using the information herein for trading purposes are responsible for their own actions. This letter is not to be construed as an offer to sell or a solicitation to buy any commodity futures referred to herein. No claim is made that recommendations will be profitable or that they will not result in losses. It should not be assumed that future performance will equal or exceed past results. Network Press, Inc., its directors, editors, employees and clients may purchase and/or sell the commodity futures referred to herein. Subscription fees are not refundable. Consul-

tations with Mr. Bernstein are available by appointment only. Reproduction of this letter by any means is prohibited without prior written permission of NPI. Brief quotation is permitted if complete source credit is given.

© 2008 Network Press Inc. PO Box 66767 Scotts Valley CA. 95067 USA 800-678-5253 831-430-0600 FAX 831-430-0900

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