BI-WEEKLY COMMODITY OUTLOOK

THIS PUBLICATION CONTAINS THE VIEW AND OPINIONS OF THE AUTHOR, EXCEPT WHERE OPINIONS ARE ATTRIBUTED TO OTHER SOURCES. WRITTEN PERMISSION IS. REQUIRED PRIOR TO ANY DISTRIBUTION OR REPRODUCTION. FUTURES TRADING IS RISKY AND CAN CAUSE SUBSTANTIAL FINANCIAL LOSS. THE USE OF OPTIONS AND OPTION TRADING INVOLVES A HIGH DEGREE OF RISK. THE USE OF STOPS MAY NOT LIMIT LOSSES TO INTENDED AMOUNTS. SPREAD POSITIONS MAY NOT BE LESS RISKY THAN OUTRIGHT FUTURES POSITIONS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. SOURCES ARE BELIEVED TO BE RELIABLE BUT NO ASSURANCE IS MADE FOR ACCURACY. ADDITIONAL RISK DISCLOSURE IS AVAILABLE.

6TH OCTOBER 1996



Last week the ENERGY complex soared again. The Weather Service forecast the first blast of cold air in the Northeast where 75 % of heating oil in the country is used would be a bit colder than normal. Obviously the predicted cold weather was enough to put traders over the edge as stocks are 14.5 @ below last years supplies even though refineries are at or near capacity.

Natural Gas levels are 10 % below last year's levels following last years cold weather. Tight supplies worsened by the same problems in Europe. European customers are snapping up American heating oil supplies.



As readers know we have been bullish the energy markets for some time.

However, we did not expect the surge to happen as quickly as it did.

We would rather be right and patient early, rather than late.





Take some profits on Crude or Heating Oil next week on early strength

Some strategies would include selling calls against the positions to Neutralize yourself while taking advantage of time decay.



One market you should keep close eye on is Coffee.

The recent wide swing Coffee has had over the last Two months

paints a interesting picture.

Roasters are Gearing up for heavy winter consumption by aggressively

buying coffee futures. The bull spreads improved along with the general market.

The Shortage of quality coffee is exacerbated by Political Unrest in COLUMBIA,

the world's 2nd largest COFFEE EXPORTER.



According to our sources in Columbia, guerrillas have been hijacking

and burning trucks in the rural coffee growing regions.



The US stockpile of coffee now stands at a historic low of 1.8 million bags !!



The Five year average is about six million!



Commercial interests are most likely waiting for a dip into the 103/105 area

before purchasing additional contracts.



Technically speaking a reversal buy signal occurred on Oct 1 when

DEC Coffee Closed over the 104.10.



The recent rally stopped at 10.20 on Friday where a Fib arc lies at 110.50.

Now we all know Coffee is not for everyone.



A suggested strategy would include buying DEC futures and selling the

March Calls. Taking advantage of Bull Spreading and offering some protection

via the Short March Calls, purchases should made during periods of weakness.

Longer Term analysis suggest the coffee may extend a

rally into 124-126 region during DEC / Jan time frame. IF IT HOLDS.



A move of over $ 5000 per contract !



The Grain market took it on the chin again last week.



However DEC Wheat did manage a small gain late in the session on Friday

My suggested buy area was touched and the mkt closed higher .

Any rally should press to 438/452

How far down can wheat go? A thrust under 400 towards 387 should hold

and be bought



Beans and Corn were under heavy fund liquidation, a sign the break

may be close to an end.



Look for buying opportunities in corn.

Dec Corn is oversold.



Any rally should move the market towards 303/311.



The recent pig Crop suggested more pigs would be around in the winter spring

time. A continued expansion by the large hog farms is going help

Domestic consumption . This is somewhat supportive to the March Corn

contract.



The main question is will the corn and Beans bounce?



I believe value should be near these levels.



The panic selling should be just about over.Longs have now been washed out of these market, however the technical damage is great.



Additionally we are entering a period of '"No Stories".

A lack of buying may occur until the normal seasonal bottom occurs

in the next 2/5 weeks.



Range trading should be predominant for now.



Bellies and Hogs turned weaker towards the end of the week

Feb bellies are ready for a press to the 7500 level this week.

targets of 7200/7300 are within this week to next weeks parameters as some seasonal tendencies down start during the second week of October.

Hogs have remained very firm however a topping action

seems to be just around corner.



A contrarian point of view would suggest that the 2 year rally in

hogs may be ending.

The large Hog factories had factored in a price of 3.50 corn to maintain profits.



Now that corn is at 290 for DEC expect the commercial hog farms

to increase their Herd substantially in the coming months. Remember, Hogs are refined Corn.



We will take a look at cattle during the week.



WILL GOLD AND SILVER EVER RALLY? The answer is yes,

the question remains when.

I still advocate purchases of options for next year's contract.

They are cheap and good "lottery tickets' in my estimation...



In Our Dec Cotton last investment outlook we mentioned Dec Cotton.

On Wed of last week Dec Cotton reached a high of 78.10 . A clsoe over 7710

next week would auger for a thrust into the 8110 area , conbtract high is

8440 set last May. However we would not be averse to taking some profits in the

8090-8810 region if offered this week. Buy on dips near the 7510 region if able

early in the week.



As we move from Summer into Fall /Winter nimble traders are offered a

plethora of '"winter markets". The Annual hope for a freeze in Florida is a

common one Being in before the scare is best .

"Buy the time news hits the wire it''s usually time to sell"

102/104 area offers good support. A close over 111 would bring in some

new buyers with a target of 117/119. Longs should be patient......



If you have any question e-mail or call....

also have an additonal e-mail address when AOL goes down

(freesubsr@worldnet.att.net)



Happy Trading !



Bill