Jan. 12, 2007 Recap and Stocks to Watch

The Nasdaq continued to lead the major indices higher on Friday. It closed at a new 6-year high and above its upper Bollinger Band for the second day in a row.The S&P 500 and Dow made new closing highs and are just a buy program away from making new intraday highs. So the technical picture is very bullish but we must keep in mind that the crush of earnings reports coming out this week and next will likely be the driver of the action in the short term. The charts of the indices and of DBA are below:

The Nasdaq appears to be starting another Bollinger Band walk, like it had in November.

Unless we gap down tomorrow I expect the old intraday high to be taken out and then a new trendline will have to be drawn from the July low though the January low.

The Russell is trying to play catchup with the other indices. It looks like it has a bit more resistance to get through compared to the S&P 500.

Friday on CNBC’s ‘Fast Money’, Eric Bolling recommended using the new ETF, PowerShares DB Agriculture Fund (DBA) as a way to play the recent pop in corn. DBA is rebalanced every November to be 25% of each of the following: Corn, Wheat, Soybeans and Sugar. The current weighting is:

• Corn — 26.7%
• Wheat — 24.89%
• Soybeans — 26.24%
• Sugar #11 — 22.17%

Not that Deutsche Bank is biased ( ) since they created this and several other commodity ETFs recently but they just put out a bullish commodity article which says (emphasis is mine):

Corn prices surged to a 10-year high on Jan. 12 in the U.S., after the government predicted the smallest global supply in 29 years. Corn futures for March delivery rose 20 cents, or 5.3 percent, to $3.965 a bushel on the Chicago Board of Trade, the highest since July 1996.

Prices of wheat have also jumped as drought damaged crops in countries including Australia. Wheat futures rose to a 10- year high of $5.57 a bushel on Oct. 17.

If grain prices increase to the same degree as previous rallies in the 1970s, corn may rise to $6.30 a bushel and wheat prices may climb to $13.3 a bushel, Deutsche Bank said.

So if you agree with that and don’t have access to futures, DBA may be a good way to go. Here’s the chart, which unfortunately doesn’t have any historical data filled in:

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