I see a price squeeze setting up in the July soybean contract as it heads toward expiration. A price squeeze occurs when the shorts (who are obligated to deliver a commodity) can’t find the product to deliver and instead must “pay up” to get out of their short position. This is what happened last September.

Because of low prices, farmers in the cotton belt, which includes states such as Louisiana and Mississippi, planted the lowest cotton acres in 25 years. Lower acres equal lower supplies; add in a small carryover of supply from last year’s poor crop and supplies at the tail end of this crop are projected to be the smallest in seven years.

Why do so many people sell at the bottom, or buy at the top?  It’s because they’re acting emotionally instead of intellectually. There’s one simple way to avoid this: Don’t get attached to any position. Trading shouldn’t be an ego thing. There’s always another market tomorrow, and another yet the week after.

A dramatic weather event last week in the Southern Plains could significantly influence future wheat prices. An untimely hard freeze no doubt caused crop damage and killed a portion of the immature wheat crop.

Charts have predictive value for this reason: Large and informed buying and selling can’t be hidden; they show up in market movements. In this issue I’ll share with you some predictive chart techniques and present some interesting charts of certain commodities that represent potential trading opportunities.

If current demand trends continue, the US could theoretically run out of old crop soybeans before the new crop becomes available. In reality, supplies never actually run out. What occurs is shrinking supplies effectively lead to higher prices, and higher prices eventually ration demand. We’re looking to play for those higher prices.

Although it’s never prudent to rely on just one indicator, this, in my experience, is a particularly powerful one. The silver market has been in a bull trend for the past five months, and we would have to conclude at this time that the volume spikes registered last week are indicative of a major top.

I see the gold market moving higher over the coming three to six months and perhaps beyond that time frame as well. I’m not an expert in gold mining stocks and have noted many of these have actually moved lower despite gold itself moving higher. Therefore I want a pure gold play, with some leverage, but without sticking my neck out completely.

It will no doubt be an interesting year. Don’t let the gloom and doom out there blind you to the fact there will be some phenomenal trading opportunities in 2009.

Be selective in picking your trades this coming year because these days preservation of capital is critical. Appreciation of capital is the goal, and it’s certainly attainable; however, today’s markets favor aggressive traders opposed to longer-term investors.