Is this the first “real ” week of Jan 2010?

Well, this week, I can’t imagine any fund managers or big traders still sitting in the cayman islands, counting their money and sipping 30 year old scotch. My guess is that this will be the first “real” volume for 2010. Basically for the last 7 weeks, the volume has been a joke. We had the “almost” meltdown Thanksgiving day eve, with the bank of Dubai mess. Since then, almost every move has been suspect. The bottom line is that a lot of traders were gone.

Here we go, however, for the second business week of 2010. I suggest strapping on your 9 point safety harness and getting ready for a roller coaster ride. After Friday’s “disappointing” unemployment numbers, the market is ripe for a move. Either traders are going to throw in the towel on the US equity markets in short order, or more likely, in my opinion, is that they are going to put their stockpiles of cheap US Dollars to work buying up as much physical “stuff” they can manage. Either way, in the next 3 weeks, we should see the dollar/gold/physical commodity hedge play itself out.
I think if we break 78 in the dollar index, 80 to 81 is a shoe in. Failure to launch through that resistance will have us down at 75 to 74 again in short order, with gold and silver going back to test their recent major highs. So, bottom line, watch that relationship.

In the grain complex, we will see if anyone has any clue as to the meaning of the words “follow-through”… We have been lacking any real solid move we could sink our teeth into over the past 4 months. Sideways to sideways to maybe a little higher…. This week, these funds will either put up or shut up. Either way, be prepared for at least a 20 to 30 percentage point move. The time for waiting is over. Either the funds show up and defend their longs, or we all rotate down much lower in these grains, and wait for another supply disruption or another buying program from China to scoot us on the demand side. Maybe that would explain the recent rally in the wheat, in the face of bearish fundamentals. Just food for thought….

Good Trading