General Investment Themes from Barron's Roundtable

Barron's roundtable did not disappoint as some of the most influential financial minds were interviewed on what has happened and what is to come, oddly enough we agree with most of what was said. The general themes were: gold should be in your portfolio, a correction in equities is coming, the paltry returns in Treasuries do not justify an allocation, at some point the Fed will be forced to raise interest rates, and finally, the actions by the government should cause inflation if not hyperinflation. Sounds to me like a recipe for a continuing bull market in commodities.

Energies

The DOE said crude oil supplies were down 4.4 million barrels, supplies of gasoline were down 1.6 million barrels and heating oil supplies were down 800,000 barrels. August crude oil closed up $3.95 to trade to the highest level in seven months. Prices have traded higher now 7 out of the last 8 weeks, talk about a trend. Last week's high at 73.90 should serve as resistance, followed by 75.00 with support at the 9 day moving average of 70.40. This level has acted as support since prices closed above the 9 day moving average on 5/18. August heating oil traded higher by 7.90 cents last week. Resistance is seen between 1.90/1.92 with support at the 9 day moving average at 1.8325 followed by 1.76. August RBOB gained just under 9 cents to close above $2 for the first time since mid-October. After reaching that landmark we would expect some profit taking. Support comes in at 1.88/1.90.

The DOE said underground supplies of natural gas were up 106 billion cubic feet last week. August natural gas closed up 1 penny on the week. A triple bottom at 3.85 should act as solid support with resistance coming in first at 4.40 followed by 4.70. Prices were higher by 25 cents last Thursday on very good volume; almost 3 times the average volume of late. We advised clients to cover at least a portion of the recent fence position at a $1600 profit being we could get some spillover weakness from Crude. Our recommended trade currently is to buy the September $4.50/5.50 call spread near $2,200.

Livestock

August live cattle were higher by 65 ticks last week as movement of late has been like watching paint dry. This scenario has played out well for one of the livestock CTA's that we work with as they typically write "out of the money" options. Support is seen at 80.50 with resistance at the 20 day moving average at 82.35. Trade idea: buy August live cattle/ sell October live cattle at -550.The widest this spread has been is -650, our target is to pick up 200-300 points. August feeder cattle were higher by 1.225 ticks closing 320 ticks off their lows. Support is seen at 96.90 followed by 96.00 with resistance at the 20 day moving average at 99.00.

Demand for pork continues to suffer, hurt by the world's reaction to the H1N1 virus. Last week the World Health Organization declared a flu pandemic due to the spread of the H1N1 virus. In spite of assurances from numerous health organizations that eating properly cooked pork is safe, the hog industry continues to suffer. August lean hogs closed down .325 ticks having closed lower now for the last 4 weeks. Last week's low at 57.785 should support while we see resistance at 61.50.

Financials

Stocks: Not only are we seeing less upside but the volumes have shrunk considerably, both signs of an interim top. The S&P added just 6 points last week registering its 12^th positive week in the last 14 to close slightly below 950. The Dow ended the week up 36 points to 8799 finally making its way in the black for the year. The NASDAQ rose for the 13^th time in 14 weeks adding only 9 points to 1859. We don't suggest celebrating the 40% rebound for too long as a correction should be just around the bend. As investors recognize the quick recovery and increased growth that has been priced in will not be realized, expect profit taking. Moreover a sell-off is forthcoming being the fundamentals don't match Wall Street's perception. Friday we were buyers of July 875 ES puts for clients for $575.

Bonds:  There has been talk from Brazil, Russia and China about selling US Treasuries and buying bonds from the IMF. The anguish is with the US dollar as the world reserve currency amid growing debt becoming a deeper concern. September 30-yr bonds were higher by 29 ticks last week, but before getting excited recognize last week was only the second positive week in the last 3 months. Support comes in at last week's low at 111'21.5 while resistance is seen at 116'16 followed by 118'16. From here we expect a bounce, how we are positioning clients is long 30-yr bonds and short 10-yr notes. (NOB spread) September 10-yr notes were higher by 27.5 ticks last week. Support is at 113'10/113'20 with resistance at 115'16. We would advise selling into this rally in the Euro-dollar. Prices were higher by 20 ticks last week and while we could get another 25-50 ticks we would not expect much more. We are shorting March 10' futures and depending on the premium we will be buying 97.50-99.00 puts.

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To find out exactly how we are positioning our clients in commodity futures and options, contact us today at 1-888-920-9997.

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Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions.

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