Looking forward: Two trades for next week
Today's Financial News - Posted September 18, 2009
With the G-20 summit about to fire up in western Pennsylvania, get ready for a fast-moving week. As our global counterparts air their grievances, the trading is going to get red hot.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): As we put another big week into the history books (359% cumulative gains on just five trades in ten trading days for TFN Strategic Trader subscribers), it is important to look forward towards next week.
It will be another doozy.
Most notably, we have the G-20 summit kicking off in Pittsburgh next Thursday. The global economy, healthcare and climate change are all going to be hot topics.
But nothing should get more attention than the disdain for the American dollar that will be obvious at the conference.
Already, the nasty rhetoric is in full swing thanks to our on-again-off-again comrade Vladimir Putin. Earlier today Russia’s prime minister picked on the American government for its “uncontrolled issue of the dollar.”
His country’s calls for a global economy denominated in anything but the greenback are growing louder by the day. Of course, plenty of his Asian counterparts are joining the protest.
Next week should be a strong barometer of the leading nations’ plans for dollar dominance. After the dip the dollar took this week against the euro, the key currency’s future does not look bright.
Need a couple ideas for trades next week?
As has been a dominating theme over the past couple of months, the commodities markets are likely to be red hot next week. A falling dollar is a commodities trader’s best friend.
Uncle Sam’s worst nightmare
If you have been following my “Commodities Carry Trade” play, you know the position is up by more than 80% at the moment.
(If you have not been following the action, read this report right now.)
Of course, not every entry in the commodities complex is a good bet. Natural gas had a stellar week but the action will not last.
With few fundamental changes over the past five days, natural gas prices surged on pure speculation. The longs are betting prices cannot go much lower. With gas hitting crashing to the $2.50 level recently, speculators are getting in at what they feel is the bottom.
It is a terrible move. The traders are wrong, dead wrong.
Most players look at historical trends and think gas prices will rise this winter alongside demand. In the past, it has been a good trade.
But this year is unlike no other. Not only is demand going to remain static, but production will continue to rise. All across the nation, gas producers are unlocking wells and boosting production.
As I write, the nation’s natural gas inventory is 16.4% higher than 5-year averages. To put it more succinctly, the amount of gas in this country is enormous. Yet if producers want to stay in business, they have to keep filling their pipelines.
In the coming weeks, we will hear more and more about growing inventory levels. Before November, the markets will be flooded as storage facilities fill up and gas is dumped onto the market.
The folks that went long into the natural gas market this week will get crushed. If you want to play the situation, go short on just about any company with a stake in the market. For more leverage, buy put contracts.
Next week is going to be an important one for this country and the markets. As our global counterparts turn on the dollar, the commodities market will get even hotter, but you had better steer clear of the ice-cold natural gas sector.
It is going to be interesting to see how Washington bails itself out of this mess.
Next Article: Options strategy: Buy the house and put the odds in your favor !
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