The Rude Awakening
Wall Street, New York
Thursday, September 14, 2006 ------------------------- - Hummer drivers celebrate as crude leads the commodity
meltdown,
- Long-term bulls vs. short-term dips – an energy turn
around or buying opportunity,
- Testing trendlines, more red arrows, the reset of the
markets and more...
------------------------- From atop a blustery rooftop in New York, Joel Bowman
reports... Commodities again lead the charge this week...the charge
downhill that is. Hemorrhaging from almost every orifice,
the beast is slowing considerably in its pursuit of some
lofty targets set by many analysts. Gold has plunged
another 3.5% for the week, silver over 8% and the entire
CRB commodity index is down 3% led by a sharp decline in
crude. The rest of the markets love it when crude takes a dive.
Operating costs go down, for one, and folks in Hummers can
turn their noses up at oil producing countries while paying
far less at the pump. But is it too early to celebrate the
return of cheap road trips? Perhaps... In today's Rude Awakening, guest columnist, Stephen
Belmont, offers a kind word for crude and even suggests a
limited-risk way you can invest in it. Mr. Belmont is a
senior partner and chief market strategist for commodity
broker Rutsen Meier Belmont Group (RMB Group) in Chicago. Read on before planning any cross-country U-Haul treks and
send any thoughts of your own t
aussiejoel@the-rude-awakening.com Enjoy... --- Oil Trading Special ---
NYMEX INSIDER: OIL'S REBOUND "COULD BEGIN AS EARLY AS
TUESDAY MORNING AT 10 A.M." According to a senior energy trader with a personal
connection to the market makers setting crude oil prices in
New York, a sudden wave of demand for 145 million barrels
could flood the markets come Tuesday morning... This $10.8
billion explosion could "catch the whole world off guard"
while sending oil off on a 33% price rally... Here's how this trader's close connection expects to
leverage the coming rebound into a 528% windfall, and how
you could join in... http://www.isecureonline.com/Reports/DFT/EDFTG908/ ---------------------------- The Commodity Comeback
By Stephen Belmont Is the bull market in commodities finished? Given all the
glowing red minus signs that have been crowding commodity-
trading screens for the past three weeks, you would
certainly think so. Crude oil has declined 18% from its
July 14th closing high of $77.95 per barrel. Unleaded
gasoline has tumbled more than 30%. Grains and soft
commodities have stalled, while precious metals have
slumped toward their lows for the year. While it is still way too early to pronounce the death of
the commodity bull, there is certainly no question that
almost all of the commodity markets are at critical
junctures. Crude needs to find support at $60 per barrel in
order to keep long-term upward momentum intact. Similarly,
gold and silver must test and exceed their highs of last
May if they are to justify the plump price targets (upwards
of $1,000 in gold and $30 per ounce in silver) that many
bullish analysts have set. Will this happen? We don't know.
Of course, this is the whole point behind using options. We
can be dead wrong without losing our shirts. That doesn't mean the latest correction in the commodity
markets hasn't been troubling. As traders, we need to allow
for the possibility that the commodity markets could be
signaling an impending global slowdown, that expensive
energy may be the key to lower prices by curtailing demand,
that the Fed's unprecedented tightening campaign has
achieved its designed purpose of letting air out of the
real estate bubble and that, after years of profligate
spending, the American consumer is finally tapped out. However, we also need to acknowledge that we are still at
war in Iraq and Afghanistan and we will continue to be at
war for the next two years at least – no matter who wins
the upcoming mid-term elections. We need to realize that
Chinese, Indian and Developing World demand for oil is
almost certain to rise over the next few years. We need to
look beyond the headlines and recognize the oil from the
big new Chevron-Texaco discovery in the Gulf will not come
on line for five years at the earliest. We need to see past
the current seasonal weakness in grains and notice that
global grain stockpiles are currently at their lowest level
in many years and may not get any relief – even from bumper
crops – as new ethanol plants come on line and boost future
demand. 
Bottom Line: The bull market in commodities my be looking a
little long in the tooth but is nevertheless, still intact.
Important markets like crude oil, the precious metals and
the broad-based CRB Commodity Index are all holding their
long-term uptrend lines. Until these are broken with
conviction, the correct play is to buy weakness. The nearby
chart shows the broad-based CRB Index. Prices have yet to
break the steeper trendline crossing today at 373.50. The
CRB will remain in an intermediate-term uptrend as long as
it holds this level. It will remain in a long-term uptrend
as long as it holds the bottom trend line. 
The chart below shows near-month (continuous) crude oil
futures going back to 2003. As you can see, corrections
just like the one we are currently undergoing have been
part of this bull market since the very beginning. The
biggest correction in terms of price was the $15.50 (21.9%)
correction that began last September and ended last
December. This was also the longest correction, lasting 12
weeks. The biggest correction percentage-wise was the 37.3%
($14.92/bbl) sell-off of spring 2003. (Note: This occurred
after the conventional ground war in Iraq, when nearly
everyone still thought that US control of Iraqi oil would
lead to increased supply.) The shortest correction occurred
last winter and lasted a mere 3 weeks. The current correction is now 9 weeks old compared with an
average downturn of 7.8 weeks. It has taken prices right
down to the steeper uptrend line. While prices could head a
bit lower over the near term, ($60 per barrel is possible)
this market has now entered a buy zone – especially if you
believe the bull market is still intact. The correct course
of action in a bull market is to buy breaks at support.
Crude is at support. The latest decline has also taken a lot of the speculative
froth out of the market. No longer do we hear about Iran
mining the straight of Hormuz and cutting off oil supplies,
or about the hurricane season and the potential of another
"big one" threatening the Gulf. The risk premium that these
two potential events engendered is now gone – despite the
fact that hurricane season is only half over and the
standoff in Iran is not even close to being resolved.
Better still, once-loved crude oil is becoming more hated
by the day. That's typically a bullish sign. If you are inclined to establish a bullish position in
crude oil, I would suggest the following spread trade: Buy June 2007 $80 crude oil call's while simultaneously
selling an equal number of June 2007 $90 crude oil calls
for $1.30 or lower, looking for the market to test its
inflation-adjusted highs just over $90 per barrel prior to
option expiration in mid-May. If filled at $1.30, your
maximum risk is $1,300 plus transaction cost per spread.
Your net profit potential is $8,700. [Joel's Note: Mr. Belmont is not the only one who has faith
in the long-term commodity bull. One senior energy trader
actually predicts a reversal much sooner than most
investors think. Learn how a single phone call from the
NYMEX pits could turn a mediocre month into a great year
for you. Contrarian Energy Investing
http://www.isecureonline.com/Reports/DFT/EDFTG908/ --- Special --- How This Company's "Grandmaster" Strategy Could Net YOU 20-
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