COMMODITY PROFITS 2006 REDUX
by George Kleinman
Editor, Commodities Trends
January 17, 2006

In 2005, the hot commodities included copper, sugar, orange juice, gold, silver, aluminum, energy, the stock market (that is, if you knew which stocks to pick) and even the US dollar. Then there were those not so hot markets, such as corn, soybeans, wheat, cocoa, coffee, the Yen and the Euro (much to Warren Buffett�s dismay).

As we enter a new year, some of the previously hot commodities are cooling off and certain others are warming up. So which commodities (or currencies, or stocks) will be the hot tickets for 2006? There will undoubtedly be surprises by the end of this year because the public usually looks backward, not ahead. However, before we address that question, I'd like to raise another question equally as important.

What will be necessary to profit in commodities this coming year? The answer is conditions that produce sustained market trends with volatility. With the growing economies in China and India, record large US trade and budget deficits, diminishing supplies of certain commodities and perhaps a few weather related moves, the conditions in the commodities and financial futures do appear to favor sustained trends and volatility. However, it was Soros who noted the most important fundamental that will move any market is what he called credit flows. What he meant is that market trends are formed by money that for some reason flows into a market.

My personal trading plan (one which I'll execute in Futures Market Forecaster) is to successfully identify (and then capitalize) on a market�s trend. There are different ways to approach this. While it�s good to be aware of the fundamentals of supply and demand, I use a technical approach using indicators including overbought/oversold, moving averages, open interest, volume, news reactions and relative strength, while evaluating the sentiment and positions of the major players. For success, it's also vital for a trader to utilize proper risk control techniques because we're dealing with the future (and, as Yogi Berra once said, "the future is unknown to an extent").

With that said, I'm concluding this issue by sharing some charts with you. These are the weekly charts of seven markets that I have targeted for either new or continued bull moves during 2006. These seven are macro areas worth considering; timing is critical.

For example, just like last year, I wouldn't be surprised to see a price break during January for wheat and soybeans before the market starts to rally. This is what happened last year--due to excellent growing conditions in South America early in the new year, the market broke and then rallied sharply with an ultimate crop size that turned out to be disappointing. Energy looks to weaken a bit in the short term as long as the winter remains mild. However, longer term people aren't driving less and more people than ever will own automobiles in 2006.

WHEAT [KANSAS CITY]


Source: www.commodity.com

GOLD


Source: www.commodity.com

CRUDE OIL


Source: www.commodity.com

CANADIAN DOLLAR


Source: www.commodity.com

COCOA


Source: www.commodity.com

SOYBEANS


Source: www.commodity.com

COTTON


Source: www.commodity.com

© 2006 George Kleinman
Editorial Archive

The above seven markets represent profit opportunities for commodity traders in 2006--opportunities that I'll be trading throughout the year. 2005 was an excellent year for commodity profits as well. To see how well subscribers to Futures Market Forecaster fared, sign-up for a risk-free subscription.

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Risk Disclaimer

Futures and futures options can entail a high degree of risk and are not appropriate for all investors. Commodities Trends is strictly the opinion of its writer. Use it as a valuable tool, not the "Holy Grail." Any actions taken by readers are for their own account and risk. Information is obtained from sources believed reliable, but is in no way guaranteed. The author may have positions in the markets mentioned including at times positions contrary to the advice quoted herein. Opinions, market data and recommendations are subject to change at any time. Past Results Are Not Necessarily Indicative of Future Results.

Hypothetical Performance

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.