G’day Traders,

It’s a beautiful day on the GC today. I got a really good night’s sleep and am looking forward to a great day.

There are some really great moves happening in Agricultural Commodities, which I will discuss further down. The Obama administration put out earlier in the week a fun, simple looking ad on Wall St reform. The ad really blamed the whole financial crisis on Wall St, which I think is a really bad move because, even though I think financial institutions are usually out to rip off the customer, in this case the government gave them a green light to do it and Americans were more than happy to borrow the money (even if they couldn’t afford it).

Really though, it’s a bad move because it’s about making yourself look better, to shift the responsibility, by stabbing someone else in the back. Does this ever really help the situation? Isn’t the government there to help society? I don’t think this kind of advertising does at all because, sure you want to put limits on Wall St, but you also need to instil confidence in the system. This is why so many investors are out of the game at the moment.

Social mood is also poor. American brands and celebrities are villains at the moment. Think of Goldman Sachs. Even Warren Buffett has been given a hard time lately. Then think of Lindsay Lohan, Tiger and LeBron James. This is not a good sign as the public gets disenfranchised and angry at systems – which they definitely don’t trust. There are protests and unrest, which all affects the markets. Equity mutual funds have had net withdrawals for the past three years. No one trusts the system and this is often a signal markets could crash – although timing is a completely different thing.

This is definitely something longer term investors must be aware of and in my weekly today I am going to talk about how different styles of investors can learn to understand how different circumstances affect them.

After all this, the government had to do a bit of a back-flip. There is a law that corporate bonds must come with official ratings from the agencies. This new legislation makes rating agencies more responsible and they could possibly be sued for bad ratings.

“So what?” you may think – “that’s good, they should be responsible”. I agree, but the ratings agencies are refusing to give permissions to borrowers to include their ratings on the bonds. So this week no one has been able to borrow through asset-backed bonds (there are other methods). So the SEC has allowed borrowers to issue without ratings for six months.

This is ridiculous in my opinion. It defeats the whole purpose. What is the point of ratings agencies if they refuse to rate. The original law was probably there to benefit these agencies and this is one of the key things in the new regulations and it meant that T-Bonds sold off.

The US S&P500 +1.99 European top 500 +2.13, UK +1.9%. Most Asian markets are up nicely in early trade except China, which is only up marginally.

Commodities posted huge gains overnight. Sugar up 4.8%, Crude was up the most since May and Copper hit 10 week highs. Wheat also was very strong as traders factored in potential shortages out of Russia and Australia. There is an entry signal there, but overall these moves are driven not just by demand but also lack of supply and we are seeing the fundamentals confirm our signals. I think this could be just the start for many commodities especially with the weather, which is adversely affecting many commodities. It is looking like this will be the hottest year in history worldwide.

ETFs – Social mood is another tick to the short side for equity markets. So you should get a lot out of today’s article. On the long side watch commodity producing regions – such as Brazil or even those sector ETFs.

Options – All of my options are looking good. After finding some BUPS yesterday the S&P is up near the 1100 resistance. Therefore it’s another good opportunity to look for BECS.

Today’s Top Tip!
Who has trading buddies?

Everyone should. To have someone to bounce ideas off, check up on you and pick up on your errors is of huge benefit to all traders. If you don’t have one, then the best thing to do is to go to a Traders Club, or an event somewhere that other traders may attend. Chat with other traders, exchange details and work with each other as much as you can. If you don’t have a buddy, then now is the time to get one.

Information for Beginner traders- None of the information today is really all that useful for you (unless you invest in ETFs or have investments in equities through funds) because you should be focused on following the rules. If you don’t trade commodities it should encourage you to start paper trading.

Information for Intermediate traders- Again there is a shift in good results to Agricultural commodities. I am doing great from options and the overnight rally should mean good premiums on BECS.

Information for Advanced traders- Remember my comments on Lumber? Also Sugar is moving up with quite a bit of chop, but just be patient here.

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Scott Goold

Head of Lifestyle R&D

*Please remember that these emails are general advice only*

P.S For past “Daily Updates” please vist our blog www.lifestyletrader.com/blog/