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Oct 2110

Oct 2110

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Published by: richardck50 on Oct 22, 2010
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Plaza Futures Group

Jeff Kowal | Jonathan ShieldS | ivan Ghandour | Steve harrop

of RBC Dominion Securities

Royal Bank Plaza, South Tower | 200 Bay Street Suite 2305 | Toronto, ON M5J 2J2 24-hour trading: 416-842-1100 Fax: 416-842-1130 Toll Free 1-877-387-4901 Mexico Toll Free: 001-800-514-0577 plazafutures@rbc.com

Thursday, October 21, 2010

See Page 2, or click here, for a snapshot of current market prices.

December Coffee, Daily

• In over twenty years of trading markets, you hopefully pick up a few valuable tools that are timeless in their predictive powers, and relative strength is one of them. While the natural human tendency is to look for markets that are cheap, history has shown that strong markets are usually strong for a good reason (which sometimes may not be overly apparent) and it doesn’t pay to look for things on sale - buy the premium product. We wrote about how sugar rallied to multi-month highs on Tuesday in the face of plummeting commodity markets; today, it’s coffee’s turn. This morning in New York, the arabica bean contract surged to 13-year highs as supply concerns continue to dominate (see upper chart). The latest impetus for this push higher seems to be Columbia, the third-largest producer, which has been hampered with two years of sub-par crops and it appears that they may be headed towards another disappointing year. Oh, and by the way, coffee was another market that thrived during Tuesday’s sell-off. So next time you are shopping in the commodity space, stick to the strong ones. • Could the US’s Federal Reserve Board’s decision to buy $1.7 trillion in various debt instruments finally be turning the economy around? We wish we knew for sure, but our suspicion is yes, at least judging buy the recent acceleration in the monetary aggregates, like the broad-based MZM (see lower chart). Standing for “money with zero maturity”, MZM measures the supply of financial assets redeemable at par, like money market funds, and it just made recent highs at over $9.7 trillion. Perhaps more important than the absolute level, is it’s recent acceleration over the past two months, as it could signal that all this pumping the Fed has done may be finally making its way through the system. How ironic would it be if the Fed engages in QE2 just as the economy turns? The recent surge in commodity prices may support this argument. Stay tuned. • On Tuesday, the battle of the prefrontal cortex was clearly won by the dorsal medial section of the brain, as investors indiscriminately sold “risky assets” after China’s surprise rate hike. Numerous scientific studies have proven that the emotion of fear is two-and-a-half times greater than that of greed, so that’s why markets tend to fall much faster than they rise, as most are pre-conditioned to be long, not short. We’ve mentioned here numerous times recently that many of these bull markets have not attracted piles of speculative money. In fact, in many cases just the opposite is true: those fortunate enough to be long have been anxious to book profits as soon as a little weakness is seen. Why is the average investor so scared? Look towards another part of the brain, the hippocampus, for your answer. This part of the brain is seen as critical in the formation of long-term memories, and the recent vicious recession and market meltdown of 2008 has been carved into our hippocampus, so investment paralysis has become a permanent part of the investment landscape.
Source: Bloomberg

Absolute Money, Zero Maturity (MZM), Weekly

Source: Bloomberg

today’S MarKet data (expectationS in bracKetS) CA Leading Indicators, Sept (0.2%) 8:30am US Initial Jobless Claims, weekly (455k) 8:30am US Leading Indicators, Sept (0.3%) 10:00am US Philadelphia Fed Index, Oct (1.9) 10:00am
EIA Natural Gas Inventories, weekly (88bcf) 10:30am

Futures Market Snapshot
10/21/10 7:58 AM
Product Month DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 Last Price 98.07 157.40 97.87 1.401 123.42 103.98 8.063 74.900 77.22 1180.50 2099 11115 730.3 9420 5752 3846.5 6591.00 132.71875 126.91 121.69 110 127 143 2/4 124.77 129.81 Net Change +0.09 -1.08 +0.19 0.0061 +0.17 +0.08 +0.040 -0.270 -0.19 +5.75 15.25 52 2.1 50 45.5 35 +54.00 +0.063 -0.14 -0.09 -0 -0 -0 +0.58 -0.14 Product Month DEC 10 DEC 10 JAN 11 DEC 10 LME 3m LME 3m LME 3m LME 3m LME 3m LME 3m Last Price 1345.30 23.915 1684.40 593.40 2393.00 8405.00 23,900 2502.00 26,953 2492.00 82.27 3.534 208.41 224.97 1231.00 576.00 685.25 338.6 48.80 Net Change +1.10 +0.05 -2.90 +2.75 +31.00 +65.00 -45 +52.00 +203 +52.00 -0.27 -0.005 +0.15 -0.51 +7.25 +2.50 +2.25 +0.800 +0.33 +0.19 +32 +4 2/4 -2 1/4 +3.20 -2.20

Australian dollar British pound Canadian dollar Euro currency Japanese yen Swiss franc Mexican peso New Zealand dollar US Dollar Index Mini SP 500 Mini Nasdaq 100 Dow Jones S&P/TSX 60 Nikkei 225 FTSE 100 CAC 40 DAX 30yr Bonds 10yr Notes 5yr Notes 2yr Notes CGBs JGBs UK Gilts Bunds Gold Silver Platinum Palladium Aluminum Copper Nickel Lead Tin Zinc Crude Oil Natural Gas RBOB Gasoline Heating Oil Soybeans Corn Wheat Soymeal Bean Oil Sugar Cocoa Coffee Orange Juice Cotton Lumber

Precious Metals

Base Metals

Stock Indices
DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 NOV 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10 DEC 10

DEC 10 NOV 10 NOV 10 NOV 10 JAN 11 DEC 10 DEC 10 DEC 10 DEC 10


Interest Rates

MAR 11 DEC 10 DEC 10 JAN 11 DEC 10 JAN 11 29.00 2809 201 1/4 148 2/4 117.46 261

This newsletter is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The strategies and advice in this newsletter are provided for the general guidance and benefit of our clients. Readers should consult their own Investment Advisor when planning to implement a strategy. Interest rates, market conditions, special offers, tax rulings, and other investment factors are subject to sometimes-rapid change. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member CIPF. Insurance products are offered through RBC DS Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. When providing life insurance products, Investment Advisors are acting as Insurance Representatives of RBC DS Financial Services Inc. ®Registered trademark of Royal Bank of Canada. Used under licence. RBC Dominion Securities is a registered trademark of Royal Bank of Canada. Used under licence. ©Copyright 2010. All rights reserved.

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