Jurgens Bauer's Comments on the Soft Markets for Thursday 7.31.08

I am preparing a commentary on the effect on option volatility from electronic trading. If you'd like to receive a copy, simply send an email to me at jurgensb@gmail.com

Coffee: Prices advanced in muted dealings with September ending the day at 137.55, up 1.15. September futures have been unwilling to move forward above 138.50, but did flirt with that level during Wednesday's session. Prices did hold the only real threat to the downside during the day. On the downside a move below the recent low of 132.90 is thought to signal a further break. Likewise a close over 138.50 should chase shorts and result in the election of stops. Look for a range to play out between 133 and 139.

Cocoa: The trend is down and prices remain on the defensive. Which begs the question, is there really any reason to expect prices to rally? A currency play perhaps? A strong move upward in the CRB commodity complex; political unrest? Prices remained steady on the day. No new news, but watch for values to be impacted from action in the dollar and major moves in the commodity complex. Although September options expire this Friday the potential is still there for a violent move.

Sugar: Buy stops became elected when prices shot up on spec and fund buying. It seems a story that energy traders are seeking a play and with U.S. corn ethanol trades at under $95 a barrel now and cane ethanol is even cheaper. Therefore it seems likely to many that there ought to be a play to import from Brazil and expand demand. So, it seems that there is more at work here than a simple bout of short covering. More strength of this sort may help promote additional gains.

Cotton: While cotton continues to test its recent highs it runs into selling, so that no decisive move up has been able to gain traction. This may lead some to concur that this action is base building, however until a new high can be achieved look for the market to trade in a range between 70 and 76 cents in December. From a fundamental standpoint what may be needed to get a real bull market going is for prices to retreat sufficiently to allow the export market to clean out the remaining surplus of US cotton. That way the market could position itself to take full advantage of the smaller crops expected in the world this season. In the meantime this market may be vulnerable to bullish news.

14,000 options changed hands as strangles in December were a feature. Volume was bought in Dec 60p/95c, 60p/100c and 70p/85c strangles in what was considered to be potentially a protective measure against an existing position. The scuttlebutt on the floor was that this may not have been something desired, but rather required as a "prudent" tool against a potential wild swing. There is increasing optimism among traders that that the typical summer doldrums may be exacerbated once the August crop report comes out.

Orange Juice: Values are in jeopardy of continuing their slide down after making new lows today. With no inclement weather (ala storms) to bolster speculative interest OJ looks to be on the ropes, (what better place to stage a recovery from, as shorts are getting a little too comfortable). A move to $1.00 is being touted. Obviously this market has no real fundamental threat, so technicals are the focus. Trend is down and the trend is your friend.

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