Home

Week ending August 3, 2001

IN SUMMARY STOCKS COMMODITIES
BUYS... GX, MOT, MON Coffee, Cotton, Live Cattle, LC/PB Spread
SELLS...   Palladium, Feeder Cattle, Pork Bellies, Euroyen
HOLDS...    
WATCH CLOSELY... GTNR OJ, Note/Bond Spread

          STOCKS
 
NASDAQ-  The Nasdaq is still trading within its channel.  I forecast the Nasdaq to drop in the next week or so, followed by an upswing that may finally break through this 3-month channel.  With some positive news on the economy lately, analysts are finally saying we saw the low in April, and the economy is slowly recovering.

As I predicted last month, some large companies had positive reports while an equal number of large companies had negative ones.  I still recommend investing in the larger companies, because as a whole, they will be the first ones to turn profits due to economies of scale.

On a larger scale, I am projecting the industries that will notice the tax cut first and turn profits will be retail, banking, and others where the public has direct contact with the industry.  Analysts are saying the banking industry is generally the first to come out of recessions.  Also they say that certain retail companies will do well such as Walmart.  However, not all retail stores will recover right away, so be choosey.    

 

 
MOT- Well, Motorola is definitely a leader in its industry.  It had better than expected earnings reports and is one of the first technology stocks to start climbing upwards.  Notice that the 100 day moving average is beginning to climb upwards too.  That is a very positive sign to me that we have seen the bottom and the sky is the limit.  We shall see how quickly the stock climbs.

 

 

 

  

GX- Global Crossing is still my favorite stock pick right now given the market conditions.  GX has the only intercontinental fiber-optic cable lines, which incidentally are faster than satellite for continent-to-continent communications.  GX recently announced their earnings report for Q2 and the loss was better than expected.  However the price didn't reflect it that day.  This company has incredible potential, so I recommend keep buying more shares if the stock price keeps going down, because they will not declare Chapter 11.  One downside that may be influencing the market right now is a few minor court cases against GX.  Also, there are a record number of short contracts by the big-wigs on GX right now, but as soon as they close their contracts, GX will soar fast.  Notice the high volume in combination with the increase in volume accumulation.  I repeat... buy.
 

GTNR- Gentner is a bit confusing right now, as is the case with most small companies.  Technical trading doesn't seem to work, and the price fluctuations seem to have no apparent rhyme or reason to them.  Earnings reports come out the end of next week, so that may affect the price.  In the next month, I forecast Gentner to trade between 10-15 dollar range, but your guess is as good as mine.
 

MON- Monsanto is a good solid company that has market share in the agricultural industry.  They have superior products in seed and chemicals, both items farmers rely on for a crop.  Don't expect to get rich quick with Monsanto, but it is a slow and steady climber and may be very profitable in a year's time.

 

 

COMMODITY LOWS

 COMMENTS
chart COFFEE Coffee is still near a 30 year low.  Looking at the 30-year chart, coffee has only reached 50 one other year since 1975.  One positive aspect is that coffee has been slowly declining for the last 18 months with little volatility.  Therefore, options are cheap!  Using the 50% retracement rule, December coffee should at least hit 80.  I recommend buying a December Call at 80, and if you have the money, buy a December futures contract.  When the futures reaches 80, sell futures and keep the call just in case the price keeps climbing.  I'm predicting that once the price does start to climb, it will move quite rapidly based on historical charts.
chart CORN Well, last month's prediction was correct.  However, for this coming month, I don't think corn has made up its mind which way it wants to go.  Crops look good for the most part.  In Northern Iowa and Minnesota the corn hasn't even tasseled yet.  Many areas in Kansas the corn is already brown and dead from the drought.  China, which is a major world producer in corn, is suffering from a drought this year also.  However, Chicago has been getting rains and there is lots of carryover from last year, suppressing prices.
chart SOYBEANS Watch.  May be on its way south.
chart OJ Watch.  If anything, buy a call because orange juice prices are very low right now.
chart COTTON Cotton has been dropping for the last several months.  It is near 30 year lows.  Historically cotton isn't as volatile as coffee, but I think a 52 call is a wise choice based on the 50% retracement rule.  A 66 call isn't out of line either because cotton's personality usually rebounds as far as it drops.  If cotton drops to 30-35 range, buy futures because they ARE 30 year lows.
chart OATS Currently falling in price.  Buy if drops to $1.00 again.
chart WHEAT Watch.  Currently heading south.
chart LUMBER Watch.  Extremely volatile right now.  Possibly looks like it could fall in the short term, but I would hate to bet my money on it.
chart LIVE CATTLE I have a hunch that it is a good time to buy live cattle.  All three spreads that I looked at (LC-FC, LC-LH, LC-PB) are very near record wide spreads, and they all three indicate a buy on live cattle.  On the other hand, it appears like the live cattle formed a head and shoulders, so in order to complete the head and shoulders, LC should drop another .50 before it goes back north.
chart LIVE CATTLE/ PORK BELLIES SPREAD This spread has really widened in the last few months (see chart below).  The spread is very near record lows.  I predict the end of next week would be a good time to buy LC and sell PB.
chart 10-YEAR T-NOTE/ 30-YEAR T-BOND SPREAD If hits 0 again, Buy 10-Yr T-Note, Sell 30-Yr T-Bond because we know that it will not remain at 0.  It has to be in positive ground due to economics.
chart HEATING OIL/ UNLEADED GAS SPREAD Hopefully the spread will widen in the negative direction again before winter.  If it does, it will be another great opportunity.

 

 

COMMODITY HIGHS

 COMMENTS
chart PALLADIUM It is currently on its way south, but it has a long way to go.  It would be a good selling opportunity.
chart FEEDER CATTLE Watch.  FC has just filled the 50% retracement rule.  However, the spread between LC and FC indicates that FC could keep going down.  If you do sell now, I recommend investing in the spread.
chart PORK BELLIES If you get in PB, I recommend options since it is very volatile and unpredictable.
chart EUROYEN The Euroyen may be an excellent purchase.  Currently the price of the Euroyen is 99.895.  I further studied this commodity and discovered that the Euroyen is based on the Japanese Yen.  In other words, you have to worry about the fluctuations in 2 commodities rather than just one.  If the Euroyen price drops with a short contract, but meanwhile the Japanese Yen gets stronger compared with the dollar, it is still possible to lose money.  Although the Euroyen isn't very volatile, it is still a riskier commodity than what meets the eye because of the Yen volatility.  However, one positive aspect is that one contract only costs about $300 and each tick is about a $20 yield.  Since the EY has been in a sideways channel for the last 6 months, options will be cheap if you choose to go that route.
chart 10-YEAR T-NOTE Watch