2011-05-27th (Fri)

At the end of the previous trading session I had the following positions;
Long 130 contracts Copper July 2011 with ACB of 409.26
Short 300000 USDCAD with ACB of 0.98000
Short 10 contracts Wheat July 2011 with ACB of 825.00

Today I am puzzled by the 1-Min Candle price action of Wheat July 2011 futures contracts;
High 824.13, 2011-05-27, 04:45 am EST
Low 804.38, 2011-05-27, 06:08 am EST
High 812.13, 2011-05-27, 06:30 am EST
Low 802.13, 2011-05-27, 10:30 am EST
High 825.13, 2011-05-27, 11:27 am EST
Low 810.25, 2011-05-27, 12:54 pm EST
High 819.63, 2011-05-27, 13:36 pm EST

I have seldom seen such intra-day cycles.

It is as if the Bull and Bear are having a tug-of-war and there are strong supporters on both sides of the Long and Short trade.

My pattern recognition software alerts me this is a Bearish Symmetrical Triangle, but does not take into consideration the impact of China's worst drought in a half-century is deepening, in contrast to the wet weather in parts of the US's midwest.

I am having second thoughts about my Short Wheat position and will use the Memorial Day long-weekend to research more and find reasons to both support and dispute my own Thesis.

Regarding Copper, I believe even with China's weakened May PMI figures the economy must for now continue to grow at the expected 6% annual rate to avoid the people's unrest.

Article - "China bomber seen as champion of disenfranchised - Bomber of government buildings glorified by some in China as champion of disenfranchised."
http://finance.yahoo.com/news/China-bomber-seen-as-champion-apf-4220563586.html;_ylt=AnphSmwLpjr3Bj_Z7WFJ.MKxba9_;_ylu=X3oDMTFlcmpzM3ZyBHBvcwM5OARzZWMDbmV3c0h1YkFydGljbGVMaXN0BHNsawNjaGluYWJvbWJlcnM-?x=0

I believe the central government will continue their Chinese Stimulus Package (CSP), pockets of growth and inflation will continue to be the model of Chinese economic growth for now.

Article - "Copper gains on optimism about Chinese demand - Copper rises on hopes for strong demand from China; energy, agricultural contracts trade mixed."
http://finance.yahoo.com/news/Copper-gains-on-optimism-apf-336087391.html;_ylt=Ais93dFJ1MMrQ63WPU9EBx2xba9_;_ylu=X3oDMTFkY2lhdWI1BHBvcwMyBHNlYwNuZXdzSHViQXJ0aWNsZUxpc3QEc2xrA2NvcHBlcmdhaW5zbw--?x=0

Our Short USDCAD trade has yet to make us very rich.

I believe I am on the right side of the trend, but this Memorial Day long weekend may bring bad news from the Eurozone and cause the EUR to fall and the USD to strengthen against us.

Article - "Dollar drops as worries about US economy persist - Worries about weakening US economic growth weighs on the dollar."
http://finance.yahoo.com/news/Dollar-drops-as-worries-about-apf-2642706027.html;_ylt=Au1Eowy.MqH.ga3flcfEVoGxba9_;_ylu=X3oDMTFlOHJmb2o2BHBvcwM5NQRzZWMDbmV3c0h1YkFydGljbGVMaXN0BHNsawNkb2xsYXJkcm9wc2E-?x=0

Currently I have the following positions;
Long 130 contracts Copper July 2011 with ACB of 409.26
Short 300000 USDCAD with ACB of 0.98000
Short 10 contracts Wheat July 2011 with ACB of 825.00

Copper July 2011 closed at 418.13 (2011-05-28, 00:31 am EST)
USDCAD closed at 0.97648 (2011-05-28, 00:31 am EST)
Wheat July 2011 closed at 820.25 (2011-05-28, 00:31 am EST)

Prices moved moderately in today's trading session and our account equity increased modestly.

Our first line of credit activated on 2011-05-05th (Thurs) is carrying all three positions at 75% of available margin, allowing us only a 25% buffer.

As we are carrying a Futures Contract portfolio, a 25% buffer can only sustain us from margin calls slighty beyond implied volatility.  That is why I am not entirely comfortable seeing intra-day cycles in the Wheat July 2011 futures contracts.

Any extrageneous events over the Memorial Day long weekend may cause prices to move against me.

Our total value-at-risk (VAR) is sill within our three standby lines of credit, and I have no current plans to access them.

Total equity is 179% of May 1st and is increasing due to the increased risk we took on.

Stay Tuned,

Jeff
(2011-05-28, 00:42 am EST)