Jerry Welch, Commodity Insite!
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And Only Two Trades. Part XIIII
The week just ending was far more bearish than bullish for most markets including and especially the only one I favor on the long side of the ledger. The one market I have touted loudly and often fell $700 per contract this week. But the rub is this. Had I the courage to stick with the one market I favor on the short side of the ledger, the week would have been profitable. But I am no longer short that one market as it met my downside target. I am now trying to hold on to the long position.
A few weeks ago, based on fundamentals, it seemed as if the long leg I favor was poised to get a bullish bump. Instead, the bullish news was ignored and prices dropped $700 a contract this week. And history shows that a market that goes down on bullish news is a market that wants to go down.
Nonetheless, looking at the entire Big Four: stocks, bonds, currencies and commodities I see one and only one trade to play from the long side. Thus, I will continue to try and stay long with the conviction that sooner than later, that one futures contract will rise $4,000 to $6,000 per contract and hit my upside target.
However, last week was bearish for a host of markets and not simply the one futures market I favor on the long side. The CRB Index for instance, that is to commodities as the Dow Jones is to stocks also took a hit. The CRB fell from 180.55 to 178.04, ending at a two week low. The Dow Jones at one point was down 500 points for the week before bouncing back late Friday.
My point is this. Yes, the one and only trade I favor on the long side of the ledger is not moving higher as I have been forecasting. This week was dismal for that market but then again, the same can be said about most all other markets. But with this being the 2nd week of the year and subject to the bearish infuence of the infamous Febuary Break, weakness across the board should not be a big surprise.
But I will stay the course. From a fundamental standpoint, the news that has surfaced over the past few weeks appears to be far more bullish than bearish. Thus, will buy breaks moving forward rather than sell rallies. my upside target remains $4,000 to $6,000 a contract north of where the market closed Friday.
One market I do favor on the short side of the ledger is live cattle. But here too, I have been woefully wrong about cattle as they remain just about the single most bullish US ag-market on the board. Cattle futures have been simply bullet proof for months, much to my chagrin.
But a year ago this week, February and April 2018 live cattle futures traded a bit over $127.00. A few days later February '18 traded a bit over $130 but the April '18 contract never rose over $128. And though February cattle expired at $127.57 on the final business day of February, April live cattle on April 4, traded as low as $110.50.
In other words, a year ago this week, April cattle 2018( with April 2019 closing Friday at $127.92) moved from a bit over $127.00 down to $110.50 AFTER February 2018 cattle went off the board. Will history repeat itself this year? Time will tell. But it usually does.
And here is a thought from my twice a day newsletter Commodity Insite. "There is a tendency in the livestock complex for prices to reverse sharply once the front month contract goes off the board. And it does not matter if it is cattle, feeder or hogs. Once that spot month expires, there is a tendency for the next month and those that follow to do a total "180" and head the other way." If you doubt that, check out the history of the cattle market for a year ago this week and see what unfolded the following two months.
I favor one market and only one on the long side of the ledger. And I continue to believe that cattle are up here on air and ready to head lower as they did a year ago this week when April futures in the short space of 2 months fell from approximately $127 to $110 and change.
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The time is Sunday, February 10, 8:03 a.m. Chicago
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