Trading Tutors has a large number of readers who trade futures, so in response to many requests I am reviewing some futures markets to quickly scan for interesting emerging trends. For this article, I will ignore currencies (except the AUSTDOLLAR) and share futures/indices, as they are major topics in their own right.

As with all trading, the secret is identifying the long trends. This is true whether you are an intraday, short term or long-term trader – it is always easier to trade the trend – what ever that direction might be.

For the technical trader, the future being traded generally has no intrinsic interest for them as all factors, all available information, past and present is reflected in price and volume

Even if you do not want to trade futures, the Commodity Research Bureau (CRB) index is a very relevant index for equity players on the Australian market. Not only is it used as a global indicator of world economic health but it also bears a positive correlation to the Australian dollar and in turn resource company share prices.

For those not familiar with the CRB index, it is a measure of price movements of 22 sensitive basic commodities that are accepted as being among the first to be influenced by changes in economic conditions. The 22 commodities are pooled into an "All Commodities" grouping, with two major subdivisions: Raw Industrials, and Foodstuffs. Raw Industrials include burlap, copper scrap, cotton, hides, lead scrap, print cloth, rosin, rubber, steel scrap, tallow, tin, wool tops, and zinc. Foodstuffs include butter, cocoa beans, corn, cottonseed oil, hogs, lard, steers, sugar, and wheat.

Australia is very much an economy dependant on world demand for commodities – wool, wheat metals etc., As demand for Australian products rise then demand for our currency follows. You will note from the overlayed chart below that both started to rise from October last year and have risen in harmony followed by a perfectly coinciding retracement in March.

click chart for more detail

Within the CRB, the various commodities understandably can move in or out of synch with the overall index. In fact, the CRB is an average of these very independent markets. To look at a few key of these key markets:

Gold: Has had a strong run up over the last two years and despite the euphoric postulating at the recent Kalgoorlie Diggers & Dealers Mining 2003 Talkfest, that gold has another US$100 to run, I find that difficult to support.
Zinc: Still trending strongly despite being at near a two year high.
Copper: Trading at a two and a half year high with plenty of upside but much volatility along the way.
Orange Juice: Declining and with further to fall yet.
Rough Rice: Ready to retrace before attempting a wave five top – some time away though.
Soy Oil: Has had a long trend up since late 2001 but with a sudden reversal down now under way.
Wheat: On a daily chart, it has had a strong run up over the last few weeks – but this could be a wave four retracement (up) before a final move down to a wave five.

There are other markets that are trending but not in such a defined manner as the above. These markets should offer some great futures leverage but be sure to look at both a daily and weekly chart.

Enjoy the ride.

Tom Scollon