Premium: The Abundance Engineer November 2011 - Stock & Commodity Update

Headline - Stock & Commodity Update

Our stocks took a hammerring yesterday but I see this as no more than a short pullback we are holding all positions.

I would like to introduce you to an indicator I use regularly. It is the COT -

Commitment of traders. This indicator gives us a contrarian indication, shows us what overall position the commercial hedges  - (banks institutions) red, small retail speculators yellow and large speculators (hedge funds) blue are holding.

 

Commercials are longest they've been since 2007 with their hedge and hedge funds are shortest they've ever been. In 2007 it took the commercials (red) a year to build up their long position and 2 weeks to turn short.

Commercials are banks institutions hedging their cash positions against their futures. Expect a large pullback soon.

What will be the catalist. Could be the Bernake Press conference on Wednesday following their 2 day conference or the European Central bank meeting.

While the MF Global trouble and the EU Greek debt are certainly affecting the market I do not think this is the crash just yet.

We have stops on all our positions anyway if they get triggered they get triggered. 

AVD We have had a good breakout no reason to take a profit yet. If we do get an overall pullback in the market this one will pullback too so we may look to sell half our position before Wednesday.

SCHW hasn't really participated in the big market move. We could be forming a cup and handle. The handle would be the pullback. I will keep you posted on this.

TBT is in a weekly buy. This pullback in S&P will bring a pullback in TBT and we are looking to add to our position.TBT is an inverse yield related ETF to treasury bond prices. Stocks go up bond prices go down. Bond prices go down bond yield goes up . TBT measures yield. We are bullish bond yields and bearish bond prices.

UNG is at very strong support. We haven't triggered a weekly buy signal yet so not looking to add to our position just yet. We have UNG until January so happy to hold.

We have triggered sell signals in a number of stocks in or watchlist. I am still keeping an eye on AAPL.

Macys I am still looking to get into Macy's on a pullback.

Commodities

Cocoa normally forms a bottom in November and March because there's 2 seasons for Cocoa harvest. It has done for the last 5 years. As you can see from the chart below we have formed a high close Doji and a weekly buy signal I'm looking for a pullback into the 2600 area as an entry point.

Entering a long March cocoa position on
or about November 4 and holding until on or about December 23 has worked 20 of 38 years, for a success rate of 52.6%. I would look for a pullback against weekly /monthly support and purchase 1 March Cocoa at 26.22 using 25.52 as your stop. Symbol CC.

Coffee also has a tendency to make a bottom in november. It's triggerred a weekly buy signal but it's a tricky market. High margin mostly for the big boys and options are not attractive easy to get in but hard to get out. Waiting for a daily buy signal along with our weekly as an entry point.

Crude oil can see continued weakness in November. I am looking to
sell early month strength. Selling one (1) DEC. mini –crude at 93.78
using 94.98 stop. Symbol QM.

Overall Market

It looks like the market will end the year well up but the market is in the hands of the commercials. I don't trust that, the hedge funds are short by a huge amount, the commercials are over stretched it's a shorting opportunity for sure we will likely get one big shake up of a takedown before year end.

"Whatever happens commodities win"

 

Best,

Robert McManus