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It was a wild and crazy week with all sorts of economic data. The week started out with everything rallying, Grains, Equities moving higher. However, on Tuesday the ISM Manufacturing Data came out and equities got clobbered, there was no place to run and no hide. Gold spiked, the dollar dropped, and interest rates fell, and the route was on
Between Tuesday and Wednesday, the DOW lost close to 1000 points and look like the end was near. The selloff was big enough to reverse the algorithms. As expected, Thursday early markets were higher, looking for a dead cat bounce. However, the street was really waiting for the ISM Services number, which was also a disaster. This action sent the markets into a tailspin
As often happens in extremely oversold conditions, markets tend to bounce. Thursday morning, we saw the classic "V" shaped recovery taking the DOW from down 300 to up on the day. The rally was no surprise, but the markets have changed direction in trend, and we are short.
Grains had a great week; in fact, I don't think I could have scripted it any better. A big rally on Monday, consolidation the rest of the week with Corn, Beans and Wheat closing at support. Textbook action on breakouts, we look for much higher prices and expect a great 4th quarter. Wheat is the strongest at the moment, but they are all on a breakout
Meats had a moderate week with a lot of sideways action. Fats managed to be a little positive while Feeders a little negative. However, from a technical view the action was very bullish, and a bigger rally is on its way. Hogs continue in a wild consolidation pattern with identified lows. We expect Hogs to join the party and breakout to the upside.
We were short Gold coming into the week, looked great on Monday. From Tuesday on it was a different story with Gold going straight up but looked to have topped on Thursday. The Dollar was a mirror image of Gold up Monday lower the rest of the week. Crude is trying to bowl a 300 game with 10 days in a row lower. There will be a rally which we will be selling
The Bottom Line: As we write and talk about often markets never announce themselves and when you least expect it, expect it. Everything but the Meats broke in one direction or the other, Grains up, Equities and Gold lower. We expect to see this action continue.
AG ALGORITHMS - Corn and Meal show short they reversed and are long
CORN - Had a solid up week thanks to Monday's big rally. Corn stalled the rest of the week after reaching resistance. We reversed and are long here. The 395-resistance level held perfectly, more important has been the action since. Monday's big up move is being resolved in consolidation.
Hedge Recommendation: Hedged and Selling Weekly Iron Condors
Position: Long 100% - Will add at 380
BEANS - Broke out big on Monday with follow through on Tuesday. The rally is real and failed where is should have around 920. A pullback to 900-905 is expected and should be bullish. The next up move should test resistance at 935.
Hedge Recommendation: Hedged and Selling weekly Put spreads
Position: Long 50% - will add at 900 (missed at 880-low was 881)
WHEAT - Continues its breakout and continues to hold support on pullbacks. The first test of 500 failed. The next time up should take it out and test the next level of 510. We are long with the Algorithm and are expecting a big rally. Our first big target is 540
Hedge Recommendation: Hedged and Selling Weekly Put Spreads
Position: Long 50% - Will add at 480
DOLLAR - Although the Dollar is lower this week the trend higher continues. The march to PAR is on, nothing can stop it. Remember the Dollar is also a fear asset and with the global markets melting down money will flow to Dollars.
Hedge Recommendation: Hedge dollars against cost
Position: Long 100% - Will sell half at PAR
CRUDE - What I wrote last week applies.
As we wrote last week the BS rally in Crude would fail as it has. Although we benefited from the big rally, we are now short Crude and looking for the high 40's before the year is out. The current range in Crude is 50-58 and the Backwardation pattern is in full force indicating there is more room to the downside.
Hedge Recommendation: No Hedge
Position: Short 100% - Will add at 58
S+P - The consolidation pattern is over, the S+P has broken out to the downside. We reversed our longs to shorts on Thursday morning. At the time markets were higher and got clobbered. Despite the "V" shaped recovery on Thursday we remain short and look for much lower prices.
Hedge Recommendation: Portfolios should be Hedged
Position: Short 100% - Algorithm is short
GOLD - Last week we wrote about Gold in congestion with the S+P. Gold was the first to breakout to the downside although the recent rally could reverse us back if it continues. The gold bugs and conspirators are heavy buyers. However, with our algorithm and the recent action I don't mind being short.
Hedge Recommendation: None
Position: Long 75% - Will buy at 1495
FEEDERS - Are trading exactly to script, they broke out, pulled back and are consolidation at support. We expect to take out the highs and remain long with the algorithm. The chart work being done is very bullish and it should be a great 4th quarter for Feeders
Hedge Recommendation: Hedged
Position: Long 150% - Watching the action
FATS - As we move to December the rally rolls on and Fats are mimicking Feeders, consolidating at support. The Gap from the Tyson fires has been filled and our next target is 115. The algorithm is long, and Fats look like they are ready to charge forward for a great 4th quarter.
Hedge Recommendation: Hedged
Position: Long 200% - Will sell half at 115
HOGS - Remain wild and in congestion as they are now testing the bottom end. We are long and are willing to add at these levels. The action has been very bullish with lots of price action. We are long with the Algorithm and are looking at our next target of 75
Hedge Recommendation: Hedged
Position: Long 100% - Will add at 67