Jurgens Bauer's Comments on the Soft Commodity Markets for 05.27.08

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Coffee: A calmer session Friday, in which July tested both for support and upside resistance. It found both, support in the form of a sizable bid, (which eventually was filled on the close) and resistance at 135.40. It closed pretty much unchanged on the day, but with a positive response after filling the size at 134.

Expect selling into any rally now especially since that size order on the buy sideways filled. Scuttlebutt suggests that the size buying at 134 seems to have the earmarks of the same seller at 140 and 141.

Given recent price action it's only reasonable to have a downside bias, suspecting that 130 and possibly 128.80-128.40 will be re-visited soon, (charts provide what could prove to be a head and shoulders). So should those levels fail to hold, another big drop should result. However, since such a move would attract spec shorts, I believe that with freeze season coming and harvest under way any significant drop will offer superior buying opportunities. You'll just have to be willing to catch a falling knife. Have gloves ready!

Cocoa: Went no where on Friday and again traded on both sides of unchanged, while finishing with a minor gain. More sideways work may be in store, but like a tug of war, one side may decide they are tired of the game and decide to let go of the rope, so be alert to a break out of the range between 2500 and 2750. For now, look for sideways to lower action with influence from the currency markets. If it doesn't hold 2550, look out below.

Sugar: Seems like nobody wants July. July is in trouble here and looks to move below 10 cents. Oct held better, but I'd like to rethink my opinion of Oct, as regular readers will note that I've mentioned that I hated July and liked Oct. I now wonder if Oct may simply follow the July in time. Instead, the back months may offer better spreading opportunities versus July and even against Oct. If energy prices slip further sugar may receive additional long liquidation to speed up the decline, but don't rule out corrective bounces.

Cotton: I saved cotton for last because I'm thinking it may have reached a key level and maybe even a bottom on Friday. Yes, any such call is far too premature and hard to back up, but here are some interesting facts. Last year at this time cotton reached its low. Also, while this week's export numbers were weak there was a large variety in the number of participants and that suggests that even with sources buying on a hand to mouth basis US cotton is the choice, maybe the only choice. If so, then the large surplus of inventory can begin to move if buyers decide to take advantage of the low price, especially what with plantings down around the world....  Three day weekends (when the price is right) have tended in the past to serve as opportunities for big deals to get done, why not this weekend?

Lastly, the way cotton responded after taking out the low end of the range, 6955, then support at 6880-6860, making a low below 68 and then turning around caught attention. Closing strong, and above the middle of the day's range, (importantly back above support helps too)

I like selling the Dec 72-70 puts and buying upside calls spreads. For example, I managed to sell the Dec 72 put at 315 and buy the Z 86/92 call spread for 105, a net credit of 205. One of three things can happen, 1) I hold the trade prices go no where and I gain a little, 2) Prices rally and I make a good amount, 3) Prices drop and the short puts get exercised causing me to get long Dec at a net price of 70 cent. I like owning cotton at 70 cents.

©2008 Jurgens Bauer & Associates all rights reserved.
Trading floor: (212) 748-3898, cell: (973) 652-4694

The July futures contract is used in the following analysis, however if you require information on other contract months call me at 212-748-3898, or email me jurgensb@gmail.com

Jurgens' Technical Support and Resistance

05.27.08

Cotton: (69.21 -0.78)

Support: 68.80-60, 67.50, 66.80

Resistance: 70.20-70.35, 70.65-70.69, 71.39

Coffee: (134.00 -0.20)

Support: 133, 130, 128-80-128.40, 123?

Resistance: 135.70-136.00, 138,

Sugar: (10.01 -0.42)

Support: 9.99-9.89, 9.66-9.56

Resistance: 10.28, 10.46-10.58, 10.83-10.95,

Cocoa: (2577 +3)

Support: 2550-2535, 2510*

Resistance: 2617-2626, 2655-2680, 2713-2721

©2008 Jurgens Bauer & Associates all rights reserved.
Trading floor: (212) 748-3898, cell: (973) 652-4694

Email me at jurgensb@gmail.com DISCLAIMER: Any information and opinions contained herein comes from sources believed to be reliable, but certainly not guaranteed as to accuracy or completeness. No responsibility is assumed with respect to any statement, nor with respect to any expression of opinion herein contained.  All views are the opinions of the author at the time of writing and are subject to change without notice.  No statement should be construed as an offer to buy or sell a commodity. This publication is for information purposes only: Any and all trading ideas suggested are hypothetical in nature and also subject to change without notice. Commodity futures' trading is speculative by nature and investors can lose more than 100% of their account equity. DISCLAIMER
©2008 Jurgens Bauer & Associates all rights reserved