Rob Rongve

Commodity Update

Commodity Update for Feb 1 – Feb 5 Friday, February 5, 2010

Well it has been an ugly week for the bulls. Last week we spoke about China tightening up their monetary policy and President Obama declaring war on the banks after the Democrats lost one of its all but guaranteed Senate seats. This week we have sovereign debt concerns in the Euro zone and more proof that this has indeed been a jobless recovery.

We have been hearing about the problems in Greece for a few weeks now, but things were made even worse when new concerns were aired about Spain and Portugal. Rating agencies have raised concerns about these countries ability to pay their debts which has put a large amount of fear back into the markets. The Euro has been hammered as a result, and has now slid nearly 5% since the beginning of the year. The fear index having risen as well as the Euro’s slide is the main reason for the tremendous US$ strength as of late.

News got even worse late in the week. After some positive economic reports to start the week an independent report from ADP on the employment numbers tipped the markets that indeed the US is still not creating jobs. ADP’s report was later confirmed by Thursday’s surprisingly large Initial Jobless Claims numbers and Friday’s loss in Non Farm Payrolls. The already weak equity and commodity markets pressed even lower and we now fear a much larger and sustained correction may be upon us.

We’d like to bring your attention to the Reuters CRB Commodity Index. The index is made up of 17 equally-weighted, physically traded commodities such as crude, soybeans, corn, wheat, metals, etc. The CRB Index is very significant since it measures the overall price movement of a large basket of commodities.

We’ve been trading steadily higher since reaching a bottom back in March. In fact, the index had established a significant trendline that was tested several times before being violated Friday morning. A combination of heavily overbought markets, poor North American economic news, and the worsening debt problem in the EU have all contributed to the recent sell-off we’ve witnessed.

If you’re a bear, the chart is definitely leaning in your favour. For all the bulls out there, today’s violation is definitely a cause for concern. However, either way you look at it, there are a lot of opportunities present for both the bulls and the bears to make some interesting moves.

For Price Quotes and Charts, you can check out our website: www.rbcds.com/ng.espeseth

Thanks for reading,

Regan Espeseth and Derrick Ng

Regan Espeseth, Investment Advisor

306.956.7812 | regan.espeseth@rbc.com

Derrick Ng, Investment Advisor

306.956.7804 | derrick.ng@rbc.com

Web site: www.rbcds.com/ng.espeseth

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