Croker-Rhyne Co., Inc.

Main Page  |   Philosophy  |  Current Recommendations  |  Newsletter Archives
Contact Us

April 3, 2005

As a broker whose success depends on his clients' success, what I am trying to do is get speculators to build solid, medium to longer term positions in markets that I think have strong potential....

There is a lot to be said for putting a position on when it's time to do it. Obviously, if you are just dead wrong, it doesn't matter where you do it....But if you are right, and do make the move when you "should", aside from getting a good money start with a position, the real benefits come later....In every move, there are going to be periods when the market, pauses, or backs up against you, potentially creating self-doubt as to whether you are still right (and the truth is, you never know until after the fact, whether you will end up being right or wrong) and then perhaps induce you into unwisely exiting the trade simply because you begin to fear giving back your profits. However, if you are in the trade at a good price, when those normal retracements occur, and you have a real cushion even after it has backed up on you, fear of losing becomes less of a factor.....and it's a lot easier to do what you are supposed to if a market is going your way, which is usually, just sit tight.

I now have three positions I am holding and continue to recommend buying all three:

Long Bonds since Jan. 5th
Long Cotton since Jan. 31st
Long U.S. Dollar Index since March 15th

The Fed met last week and everybody screamed, "Sell!!!", but Treasury Bonds finished this week almost 3 points above last week's lows. This is a bull market that I believe is ready for another major leg up.....Per Committments of Traders, speculators have the largest short position in the history of interest rate futures trading....which is classic....There's a first for everything, but in my 25 years of studying the markets, I cannot recall a single top in any market where the speculative public was loaded up on the short side...

On the chart below, you will note that Treasury Bonds have been in a bull market since 1981. I continue to believe this market is about to rip out of here on the upside. I don't know how far they are going on the first surge higher, but with the stage set as it is (loaded with shorts), if they are going up, I think there is a strong possibility Bonds could make one of their not uncommon 15 to 20 point moves.....For me personally, it is easily imaginable to see Treasury Bond Futures in the 130's before this year has ended....For several years, it has been my feeling Bonds eventually would reach the 135 area....While I'm not in this trade to see that happen, there is nothing that says Bonds can't take a pretty good stab at it this year....

I am still very much a buyer in Treasury Bonds.....probably more so than three months ago....

4-1-05bondsmonthly.gif (9160 bytes)


4-1-05bondyieldsmonthly.gif (15659 bytes)

4-1-04june05bond.gif (11217 bytes)

4-1-05sept05bond.gif (11826 bytes)

Buy July Cotton

After coming up about 10 cents, cotton spent the last few weeks rocking down and up....and I believe it should now be ready to resume climbing just as steeply as it has done in the past seven weeks...I still think Cotton has a long way to go....The crop is not even planted yet and you never know what the weather will do to the market over the next 3 to 4 months....You don't bet on it, but drought and hurricane damage are always a potential part of the cotton equation.....Meanwhile, world demand for cotton is quite strong, and I see NO reason on the immediate horizon for demand to do anything but accelerate. Current prices are still at extreme lows and the old commodity adage, "low prices stimulate demand", is not inaccurate....I may be dead wrong but I don't think cotton has anywhere to go but up for at least the next 12 to 18 months or so....

I continue to recommend buying July Calls.....

4-1-05cottonfuturesmonthly.gif (20012 bytes)


4-1-05july05cotton.gif (15053 bytes)

Buy the U.S. Dollar Index

During the last few weaks, the Dollar Index has moved up a little more than 2 points, or $2000 per futures contract, but in the big picture (chart below) NOTHING has happened yet. I am still an aggressive buyer of calls with puts as defense in the September contract....As I wrote several weeks ago, according to Alan Greenspan, NOBODY is worth a hoot when it comes to predicting the currencies....And this is a market where opinion is seemingly unanimous that "the Dollar can only go down".....Will all those pundits be right in the market where "everybody" is usually wrong?

I continue to see the Dollar Index as a major buy.....What do they say, "Buy Low"?....Especially when everything you read says, "Sell"?....I still think a 10-15 point rally would be easy for this market....

4-1-05dollarindexmonthly.gif (10561 bytes)

4-1-05sept05dollar.gif (12640 bytes)

Sell Unleaded Gasoline

The single biggest news story today is probably the strength in the energy market, which has resulted in recent calls for $80 to $105 Crude Oil.....After taking 5 years to go from $10 to $55, to now hear we've still got another $25 to $50 right in front of us,  is, I believe, totally absurd, and exactly the sort of price projection hysteria you get at market tops....When they tell you, "We're running out of it", my experience is, you sell it...

Over the coming months, you will probably routinely see media stories predicting that during the upcoming driving season, gasoline refineries will not be able to keep up with demand, and gas prices may go even further through the roof this summer....My guess is, you will keep reading stories like that, even while Unleaded Gasoline prices fall steadily over the next three to four months....On the chart below, you will note that Unleaded tends to make abrupt reversals, and, even at much lower levels, 25 to 30 cent rapid swings are quite common.....I think Unleaded could easily drop 30 to 40 cents between now and late summer, and for this reason, sold June Futures into Friday's record close...This trade can be taken with options but they are not cheap....Give me a call if the idea interests you.

4-1-05unleadedcashmonthly.gif (15738 bytes) 

4-1-05july05unleaded.gif (13930 bytes)

Thanks....Give me a call...There is a lot of money being thrown at commodities today, and everything seems to be doing something.....

Bill Rhyne


Main Page   |  Philosophy  |  Current Recommendations  |  Newsletter Archives 
Contact Us