The Futures / Inter Market Report

Trading the World’s Markets                             

September 21, 2007

                                            
Matthew Caruso, CMT                                  
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Continued commodity strength for months to come

Last year crude oil prices where falling during the month of September. The price of a barrel of oil was about $60.
That was 2006, look back at 2007 and crude oil is now trading at all time highs above $80 per barrel. This increase
in the price of rude has major implications for the future. As has been previously mentioned in this newsletter,
commodities tend to rise and fall together and crude’s recent rise has been accompanied by similar price increases
in other commodities such as gold, copper, wheat, the Canadian dollar and coffee. The current price increase have
however exceeded crucial areas of supply and are evidence that demand is increasing and will likely push prices
higher for all of the mentioned commodities.

Due to all of the following charts being long term views of these commodities, the message being told by the price
charts are even more significant. The ability for prices to be making new all time highs in some cases, as well as
demand exceeding crucial areas of supply in all of these charts brings about the conclusion that the demand in the
world is growing faster than supply. New all time highs in crude oil and wheat are evidence of the now new large
sources of demand from newly developing nations such as China and India. These growth stories are likely to continue
for years out into the future if history is any guide. All of the mentioned commodities are analyzed in further detail
below and realistic targets are given where possible.   


 
Figure 1 Chart by Metastock

A chart of crude oil can be seen in figure 1. Prices have completed a bullish cup and handle pattern that indicated
much higher prices to come. It reasonable to believe from this pattern that the price of crude will exceed $100 per
barrel over the next 1 to 2 years.  



After consolidating for over a year, the price of gold has finally climbed to new highs. This bullish pattern gives a
target for gold of almost $870 per ounce which is likely to be reached over the next year.  

   
    
Copper prices have yet to breakout to the upside, but prices are forminga  bullish head & shoulders pattern. If prices

exceed the trendline drawn in figure 3, copper prices will very likely pass $500 in a year’s time.



The Canadian dollar is an interesting currency to study because it moves in value very similarly to the prices of
crude oil and gold. The fresh multi-decade highs in the Canadian dollar show that the trend in the energy and metal

commodities are strong and likely to continue higher in the coming months.  



Wheat has recently climbed to an all time high. In fact almost all agricultural products have climbed significantly
higher this year. Although the short-term trend for some of the agricultural markets such as wheat are over extended
to the upside, the major breakouts point to a demand and supply environment that has not been seen in other times
and is evidence of the shift in the standard of living and life styles of many newly developing economies such as
India and China. Higher prices are likely to be norm for these markets in the future months, most likely after a
correction.

The price of coffee has scored a bullish breakout out of a consolidation that has lasted for almost 3 years. The
pattern suggests that prices can reach as high as $175 or more in the next year or so.

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