Tuesday, July 31, 2012

US flat, Euro up; Commodities Heating up

US majors were flat last night, but Eurostoxx managed it's continued winning streak up another 1%+ and looking to break the range that has developed during the current financial crisis.  Eurostoxx is now 13% off the June lows.

Ongoing talks of the Fed + Euro stimulus is adding to the continued strength in Gold - now above 1600 and we may see a meltup if we get something out of the Fed this week - unlikely given how the sp500 and dow has rebounded, but still should keep a tight watch on the Gold price action.  Tonight we will see some volatility as the Fed commentary will give us an idea of where they stand on policy.

AUD regains its strength
Given the AUD strength has implications along the risk-on rally - possible recovery in cyclicals and commodity prices, USD weakening in the final half of the year and China slowdown now fully priced in.  We are also seeing really strong performance in the Aussie banks, and there may be a lot of hedge fund covering their ASX equity shorts in the coming weeks.

AG commodities
Corn, Wheat and soybeans are still rallying after a short selloff last week - we are seeing record high prices due to US crop conditions being the worst since 1988 and driving corn prices 61% since June 15.  I am playing this trade through the QAG betashares ETF listed on the ASX.

Natural Gas continues it's bullish run
The rally to 3.21 off its lows has seen many hedge fund increase their natural gas bets - I've re-entered positions in NBR and CHK to capture the bullish momentum.  Gas has now rebounded 69% from it's 10 year low in April.