The Commodity Specialist Guide

Week 11 16 th March 22 nd March 2010 The Commodity Specialist Guide Philip J Allwright Disclaimer Mark Sturdy Authorised and regulated by the FSA

Commodity Specialist Stay BEARISH but on verge of switching to the sidelines (May-10) Stay SQUARE earlier bull momentum now weakened (Apr-10) Stay BEARISH awaiting reaction at key 76.4% level now (Apr-10) Stay BULLISH Stay BEARISH Stay BEARISH Stay SQUARE Stay BEARISH Stay BEARISH Stay BEARISH Stay BEARISH Stay SQUARE Stay SQUARE Stay BEARISH after break through key resistance (Apr-10) but recent strong bounce remains of concern (May-10) Key Reversal Month in Jan remains valid for now (May-10) focus remains on key support in the 880s (May-10) continued bear focus is on Oct-09 low (May-10) strong downmove still unfolding (May-10) s/term bounce probable after test/erosion of 2800 support area (May-10) any s/term bounce should be temporary (May-10) initial reaction around 84.00/85.00 Fibo area is negative (May-10) s/term support around 50% level remains under threat (Dec-10) bounce off 38.2% support seen as temporary, after Jan Key Reversal Month

In Crude Oil there is current temptation to step back on the sidelines, after pressure has been put on a 76.4% area. Recent weakness in Natural Gas has sidelined earlier bulls, with momentum on the wane. : Brent Crude Oil (ICE) Monthly Chart Late 2008 erosion of the major 76.4% retracement saw good support come from old 2000/2003 highs, prompting recovery. The market struggled to clear the level of the old 78.65 Aug-06 high and Jan was almost a key reversal month.

: Brent Crude Oil (ICE) Weekly Chart Price failed to hold above the 38.2% recovery level (which coincides with that 78.65 Aug-06 high). The better break of the 23.6% pullback level can currently still be seen as a sign of a more prolonged correction phase to come, despite the current strong bounce but the Jan high needs to hold.

: Brent Crude Oil (ICE) Daily Chart Apr-10: The recovery has put the 76.4% bounce level under pressure, but s/term is struggling to hold above here - this is not quite the moment to switch to the sidelines from our bear stance, but a better close through 76.4% would prompt this. The 84.22 Jan high offers next overhead resistance, which could yet hold the bear signal on the Weekly chart is still compelling. S/term we continue to await better reaction around the 76.4% level. We maintain a bear stance for now, but ready to switch to the sidelines.

: Light Crude Oil (NYMEX) Daily Chart May-10: On the NYMEX Crude chart the 76.4% level hasn t been very effective, and current bears need to see a quick turnaround. At this stage we await better reaction at this Fibo level. The 85.43 Jan high offers higher resistance the whole picture must be reassessed should this be breached. We maintain a bear stance for now, in line with that for Brent Crude.

: Natural Gas (NYMEX) Monthly Chart The Sep-09 Key Reversal Month marked at least a temporary turning point. The projected bear channel base (and 1.760 2001 low) stay out of reach for now. Weekly Chart The 2009 recovery initially found resistance near the 23.6% level on the continuation chart. This was overcome, turning focus towards the 6.720 38.2% recovery level - but support on the Daily charts has given way, postponing further progress.

: Natural Gas (NYMEX) Daily Chart Apr-10: After the breach of the 4.595 03- Dec low focus has turned to next support, offered by the falling support line at 4.400 (now tested), and also slightly lower channel base projection at 4.250 currently. First important resistance remains at the 5.056 28-Jan low. Daily Chart The break of the 4.700 38.2% level here signalled that bull momentum had weakened. On this chart next interesting support comes from around the 4.157 Nov-09 low. We maintain a sidelined stance for now.

: Heating Oil (NYMEX) Monthly Chart The substantial fall from the Jul- 08 peak tested the 76.4% 1.2045 level early in 2009, prompting recovery this has struggled after reaching the old 2005 high. Jan was nearly a key reversal month and bear signs were also seen on the shorter term charts. Weekly Chart After failing ahead of the 2.2840 38.2% retracement, a pullback phase can still be considered in process, current strong rebound notwithstanding. The break of the 23.6% pullback level was taken as a negative signal, with next focus on the 1.8060 38.2% level, which has provided support so far.

: Heating Oil (NYMEX) Daily Chart Apr-10: Resistance around the 76.4% 2.1400 bounce level now needs to repel the advance, otherwise the prior bear analysis must be discarded. This wouldn t necessarily rule out future bear action, but fresh signals must be sought. We still think that the Weekly chart offers a backdrop more favourable to the bears that the bulls. We maintain a bear stance for now, but keep monitoring the situation.

Recent s/term positive signs in Gold imply any dip should be temporary at present. Bears in Silver have become more cautious meanwhile. The January Key Reversal Month in Copper can still favour the bears, but resumption of weakness must be seen soon. : Gold (COMEX) Monthly Chart - The break higher in 2009 has been followed by a pause, with good support so far coming from above the 1014.60 Mar-08 high.

: Gold (COMEX) Weekly Chart In Dec the previous acceleration upwards reached the Fibo projection we had marked in, at 1220 (1.618 swing off prior 1014.60/681.00 downmove in 2008). Reaction here was negative, but weakness should prove temporary. On this chart note potentially strong support from the prior highs above 1000, where the 38.2% pullback of prior 681.00/ 1226.40 upmove also resides.

: Gold (COMEX) Daily Chart Apr-10: The break through the s/term channel top sidelined earlier bears. The completed 3-wave structure of the drop from last Dec s peak suggests that the bias is upward now, with s/term dips likely corrective, and holding above the 1044.50 05-Feb low. In which case lower key support around 1015/14 (Feb high and 61.8%) will not be tested any time soon. Note potential support from the old 1070s area. At this stage it is hard to judge if the 1229.00 Dec high is at risk of being broken. We maintain a s/term bull stance now.

: Silver (COMEX) Monthly Chart The long term chart shows how effective support was from a major 76.4% level (and highs from 2004/2005 too). The ensuing recovery, while impressive, has not reached the 2008 peak. Weekly Chart The push through the 76.4% 18.25 level saw a test of the Jul- 08 high, prompting a negative reaction, which violated the 16.00 support area. However, this has proved shortlived

: Silver (COMEX) Daily Chart May-10: A strong bounce has put pressure on resistance from an old rising support/return line - this needs to hold to avoid sidelining the bears. Already the upmove has been stronger than bears would have liked. Any recent sellers into this resistance would keep tight stops above 1800 for now (76.4% bounce level just below here) seeking modest partial profits within 1600/1550. We maintain a bear stance for now, but ready to sideline.

: High Grade Copper (COMEX) Monthly Chart The major reversal from 4.2700 May high eroded the deep 76.4% retracement of the 2001-2008 upmove, but failed to stay below. Note that Jan produced a negative Key Reversal Month, currently still valid. Weekly Chart The impressive 2009 recovery has failed, close to the 76.4% retracement. Note that the current strong bounce is not uncommon when a trend is in process of turning but bears will require a resumption of weakness very soon.

: High Grade Copper (COMEX) Weekly Chart May-10: On the Weekly chart of the front month the break of the 23.6% pullback level strengthened bear signals seen elsewhere (see Monthly and Daily charts).

: High Grade Copper (COMEX) Daily Chart May-10: Following the recent violation of the 76.4% bounce level we still wish to respect the key reversal month (above), with bears still in the game. But a push through the 3.5500 early Jan high would clearly change the picture. At this stage a drop back through recent 3.1600 support would be an encouraging sign. Meanwhile we must await developments. We maintain an overall bear stance for now, needing a resumption of weakness soon.

A weak outlook for Soybeans and Wheat remains in place. In Sugar further losses have confirmed a bear stance. S/term support may have been found in Cocoa, but bears still look for lower levels in due course. Bears remain well-placed in Coffee too. A recent strong recovery in Cotton has found initial resistance from a Fibo projection area. : Soybeans (CBOT) Monthly Chart - Recovery off support near the 757.50 Jun-05 high exceeded the old 1988 1009.50 and 2004 1064.00 highs earlier on, but failed to hold above.

: Soybeans (CBOT) Weekly Chart The 76.4% retracement of the 2006-2008 upmove, in the 790s, (as well as the Jun-05 757.50 high) provided a very effective zone of support. After the late 2009 recovery attempt price has slipped back - currently keep an eye on the 878.75 Oct low, with break below to provide a bear signal.

: Soybeans (CBOT) Daily Chart May-10: Current risk remains of a test of the lower key support area after the Feb bounce from around the 61.8% pullback level a channel base projection around 890.00, prior lows from last year in the 880s, and 76.4% level just below. Violation of these would be a bear signal. Downside momentum can be retained while resistance from the 997.75 22-Dec low keeps intact (so far unchallenged). We maintain a sidelined stance for now, although have been favouring the s/term bears.

: Wheat (CBOT) Monthly Chart - The collapse in Wheat prices finally put pressure on the 76.4% retracement of the 1999-2008 accelerating upmove, but found some support from the lower 434 2002 high. For now, we still keep in mind a lower Fibo projection around 270. Weekly Chart - Last year a former 23.6% recovery level twice resisted bull attempts. We also show the current 23.6% bounce level at 640.00, offering future resistance. Meanwhile the 455.00 Dec-08 low area offers the final barrier to a return to the 425.25 Sep-09 low.

: Wheat (CBOT) Daily Chart May-10: Feb s lacklustre rally attempt left the 472.00 Oct-09 low vulnerable a break below would, apart from the (relatively minor) 455.00 from the Weekly chart, turn attention to a Fibo projection around 432.00 and 425 2009 low (continuation chart again). So far, resistance has emerged from the 527.75 17-Dec low, which now coincides with a s/term bear channel top projection also keep in mind slightly higher rising return line around 540. A clear break through this would alter the complexion of the picture. We maintain a bear stance for now.

: Sugar (ICE) Monthly Chart - After failing around 30.00 this market has dropped back to test/ erode the 19.73 2006 high a s/term struggle to hold below here would not be surprising. On this chart the next main support level lies towards 15.00. Weekly Chart - We have decided to redraw retracement levels, with the 2007 low as starting point. The 19.73 2006 high combines with the 50% pullback, which could temporarily impede the downmove.

: Sugar (ICE) Daily Chart May-10: The recent breach of the bull channel base projection was a clear bear sign. S/term supports have been failing, including the 20.44 Oct-09 low, and we now note the next Fibo projection on this chart around 17.00. The current structure is not yet implying bear fatigue. We maintain a bear stance for now.

: Cocoa (ICE) Monthly Chart Bulls were unable to sustain levels above the 2008 peak. Note that the long term 23.6% retracement around 3000 has been violated now. Weekly Chart Failure to hold above the 2008 high of 3385 was accompanied by a Key Reversal Week, which marked the start of a pullback phase. The first main support on this chart, from the 2919 Feb-09 high and 2882 38.2% level, has now been violated.

: Cocoa (ICE) Daily Chart May-10: After the break below the 3000 level the market tested/eroded the 2813 Fibo projection (2.618 swing off prior 3245/3512 rally), with Feb-09 high on this chart around 2800. S/term support here is not a surprise. Near resistance comes from around 3000, ahead of the 3175/3245 area. We maintain an overall bear stance here.

: Coffee (ICE) Monthly Chart Looking at the retracement levels of the 2001-2008 upmove, the 50% mark has provided effective support so far. Also see how effective the 76.4% level of the 2005-08 upmove was as support. Weekly Chart The 2009 recovery failed ahead of the 76.4% retracement and, now, the Jan break of the rising support line has put bears in control.

: Coffee (ICE) Daily Chart May-10: S/term the downmove has struggled to move beyond support from around the 130.55 61.8% pullback level and Fibo projection (1.618 swing off prior 137.50-148.70 bounce). A rally should be temporary keep in mind resistance firstly offered by the 137.50 04-Jan low, ahead of the rising return line around 141.00 now. Note that the lower Fibo projection, 2.618 swing target, coincides nicely with the 61.8% pullback on the Weekly chart above. We maintain a bear stance here.

: Cotton No.2 (ICE) Monthly Chart Following a recent misleading negative sign the impressive recovery here has continued. Ahead of the major 76.4% recovery level above 96.00 note a channel top projection just below 90.00, which offers next resistance on this chart. Weekly Chart Another upleg from the early Feb low is clear now, with the 76.4% level violated too. Note the 85.00 area where a Fibo projection resides, now offering resistance.

: Cotton No.2 (ICE) Daily Chart May-10: The new upleg from support near the former 38.2% pullback level has eroded the rising resistance line, but found a temporary barrier around the 84.00 Fibo projection (1.6178 swing off prior 77.83-67.80 pullback) also noting the 85.00 level on the Weekly chart. Initial reaction here has been negative. First support comes from the 77.83 high, a more important level lying some way off at present, a s/term channel base projection around 71.00. We maintain a sidelined stance for now.

In EUA (Carbon Emissions) support around the 50% retracement is currently still at risk of giving way. Following Jan s Key Reversal Month in the CRB Index we hold a bear stance the current bounce off 38.2% support considered temporary. : EUA Carbon Emission Allowances (ICE ECX) Monthly Chart - In early 2009 support was contributed to by a long term channel base, an equality target and, for non-technical reasons, a floor around 8.00. We assume that a medium/ long term recovery phase will now be unfolding.

: EUA Carbon Emission Allowances (ICE ECX) Weekly Chart The 38.2% recovery level remains first key resistance on this long term chart. The current multi-month consolidation (with slight bear bias) continues to unfold. Any shorter term weakness should prove temporary though.

: EUA Carbon Emission Allowances (ICE ECX) Daily Chart Dec-10: This year s consolidation has continued, with support around the 50% pullback still under scrutiny (but holding so far). Rally attempts have been lacklustre, with current risk of a better break. This would turn initial focus towards the channel base projection at 11.00 now. However, also note lower 76.4% level at 10.30 which lies close to a Fibo projection at 10.38 the temptation would be to target this area. Currently, s/term resistance remains at the 14.48 76.4% bounce level, falling resistance line just above and then 15.17 08-Dec high. A breach of the latter would violate the pattern of falling highs and lows, and tilt the scales in favour of the bulls. We stay on the sidelines for now.

: CRB Index (CBOT) Monthly Chart Following a brief push through the 284.61 Jan-07 low the market has struggled. Jan produced a negative Key Reversal Month. Weekly Chart The recovery from the 2009 low has failed ahead of the 38.2% retracement level. The well-defined uptrend line was clearly broken, with a deeper pullback phase now considered to be unfolding the current bounce should prove corrective only.

: CRB Index (CBOT) Daily Chart + Light Crude Oil We have viewed the bounce off 38.2% support as temporary only keep in mind initial resistance around the 280.00 area, but also higher, more key, resistance in the 285/290 area (76.4% bounce and rising return line, with old Oct- 09 high also coinciding here). We would expect good resistance here, if not before. At this stage only a move to levels below the 256.89 05-Feb low would confirm the next downleg underway. We maintain a bear stance here.

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