Financials Pit Review - June 28, 2010

The Financials Pitguru Review
For the week of June 28, 2010

This trader has mentioned before over the past year or so that a double recession was possible because of the housing market. When the 5 yr arms and seven years arms come due over the next 1 to 3 years there could be serious repercussions. Besides the issues that are apparent presently like foreclosures and unemployment, consumers could just walk away from their mortgages. An article this morning by Robin Griffiths, technical strategist at Cazenove Capital also has this same belief. He mentions that consumers could try and get out of debt, but there may be no buyers to help. (1)

The battle between bulls and bears will always be around. In this current market, the bulls argue that P/E ratios are in good shape and that is a buying opportunity while the bears looks at the current status of debt filled nations, toxic assets, and, yes, a bleak housing and job market. When large companies move money out of the market and into gold and treasuries traders should be cautious. It is one thing to be doom and gloom, but it is another to be honest with what is happening out in the financial system.

Consumer spending appears to be up 0.2% which is better than expected. The thing is consumers are known for spending because of credit cards. Yes, many do slow down when the economic climate becomes choppy, but leveraging is what many consumers do. The mentality is if a person may go bankrupt they might as well have a good time and live large for the present. So, are these numbers really positive?

It seems as though people are not buying into the market early this week as the market is trending down. The S&P was around 1073, down 3 points while the DOW was down 15 to 10128. (2)

1. http://www.cnbc.com/id/37970896
2. http://www.cnbc.com/id/15839121

By PitGuru Frank LaMantia

Softs Review in The Week of June 21st - 2010

To keep up with soft market:

"Following the price action of the past week coffee traders have now developed into two basic camps, neither of which believes that the price will stay close to $1.60. I believe that while prices will certainly move up (I've pitched my tent among the bulls,) a key element fueling the bullish camp is the benefit of the flow of money. This is not a subject mentioned often enough and yet it seems responsible in a large part to premier rallies seen in commodities the past two years. The bearish camp seems more focused on warehouse stocks, the Brazilian harvest and the potential for more aggressive producer selling. In some respects the current coffee market reminds me of similar bull moves seen over the past couple of years and it might be worth reviewing moves made in cotton, crude and sugar. One major point is that once those bullish moves were over, and prices retreated, they did so with the help of gravity and moved fast. I don't expect that time has come for coffee values yet and still look for further upside.

Cotton prices are being impacted by the excellent growing conditions for the new crop. That means that the bulls who believe that prices have further to go on the upside will need help. Yes, current supplies remain tight as the transition from old crop to new takes place, but I do not expect any breath taking moves over the near term. Same type of sideways price action expected in juice.

Cocoa ought to provide a reasonable opportunity this week for bears like me to acquire some puts at a reasonable level. I do not have bullish feelings at all towards cocoa and strongly believe that demand is not going to live up to expectations. Sugar on the other hand offers a trading range potential between 15 and 17 basis the October contract."


By Pitguru experts