All markets remain quiet and lack any real conviction. As we have written for weeks the equities would make new highs and they have. The problem is they continue to grind higher. They continue to move on trade talks but always end up higher no matter what the news is. This tells us we have a bull market and very little will change that right now.
The FED continues its assault on the Dollar but haven't had great success. The quiet trade in all markets has affected grains the most. Typically, commodities tend to go lower in dull markets. The overall complacency in markets is scary but until proven otherwise we will follow the Algorithms.
Grains had a mixed week with Wheat higher, Beans flat and Corn under pressure. The action in Corn is bearish and looks like the WASDE report will be bearish. Beans look to breakout to the upside along with Wheat. Grain markets are too quiet, the trade wars have been too big of a story. The Grains have nailed the trade war news and have not been fooled yet.
Cattle continues to go higher although reaching a little resistance up here. We are expecting the rally to continue, there doesn't appear to be anything in their way. Hogs are another story and have had some wild trade the last few weeks all to go nowhere. We are long Cattle and short Hogs but could see Hogs breaking to the upside when this is all done.
The Dollar is trying to forma a "W" bottom which is bullish. We are short and will stay there until the algorithm changes. The FED continues to try and push lower but can't seem to break it which means the Dollar is probably going higher. Crude has broken out to the upside and could continue; we are not big fans but are long. Gold is getting pounded and could test 1440 December Futures or lower
The Bottom Line: Markets remain quiet it's hard to get excited about anything especially when they move so quickly on trade news with no volume. AG looks great with the exception of Corn, but we expect them all to be bullish soon. With so little action in all markets if you are not hedging you may want to observe.
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CORN - Since last Wednesday's nice up day, Corn has gone down every day since. We were bullish however the algorithm has reversed, and we are now short Corn. There is no doubt there will be a bounce but for now Corn is headed lower.
Hedge Recommendation: Hedged and Selling Weekly Call Spreads
Position: Short 50% - Will sell more at 385
BEANS - Remain in consolidation and are holding a key support level. Beans are also in danger of breaking down but have some room before we would reverse. The picture is still murky but there is danger here. We remain long but have concerns although we think they are going higher the pattern is starting to breakdown. The algorithms are long
Hedge Recommendation: Hedged and Selling weekly Iron Condors
Position: Long 50% - Observing
WHEAT - Had a beautiful recovery from last Thursday's low and now appear to be headed higher. 5.20-5.25 are resistance but should be able to breakout through those levels. Wheat looks strong and we remain long. The algorithm is long
Hedge Recommendation: Hedged and Selling Weekly Iron Condors
Position: Long 50% - Will add at 5.10
DOLLAR - As we wrote last week the Dollar was on support and very oversold. We expected a bounce to 98 which is where it is now. We know the FED will keep the pressure on the Dollar and we remain short. The Algorithms are short
Hedge Recommendation: Hedge dollars against cost
Position: Short 100% - Looking for further selling
CRUDE - Broke out this week and could be headed higher. The move up from support has been solid and although we still see a potential for the high 40's right now, we are long and looking for higher prices. The next levels of resistance are 58 -59. The algorithm reversed on Wednesday and we are now long.
Hedge Recommendation: No Hedge
Position: Long 50% - will add at 56
S+P - The new highs continue on light volume and no volatility. One thing we know for sure is dull market rise and can last for an extended period of time. There is no way to determine when it will end. We know not to sell a dull market although we believe the next big move will be lower. The only question is when and from what levels. We remain long with the algorithms.
Hedge Recommendation: Portfolios should be Hedged
Position: Long 50% - Holding
GOLD - Tried to reverse patterns as we wrote last week but failed and fell hard this week. Gold traded to resistance at 1520 and support at 1480. Gold is hovering around support and is in danger of breaking down, which brings 1460 and then 1440 into play. We are short with the algorithms
Hedge Recommendation: None
Position: Short 100% - Covered half at 1480
FEEDERS - The breakout continues, we expect new highs and the rally to continue. As we wrote last week a pull back to support was in play, after peaking on Monday Feeders have pulled back a little which is actually very healthy and should lead to higher prices. Algorithm long as are we.
Hedge Recommendation: Hedged
Position: Long 100% - Will add at 142
FATS - The rally rolls on, Fats achieved our 120 level before pulling back a little. We are still buyers at 116 and are looking for higher highs. Our next target is contract highs around 125. There is no reason to expect this rally to end, with each pullback the next rally has more power, there is no reason the rally will not continue. Algorithm long as are we.
Hedge Recommendation: Hedged
Position: Long 100% - Will add at 116
HOGS - The wide sweeping congestion continues; we are seeing big moves in either direction every day. The action itself suggests a big move is coming, although we are short, we expect the next big move to be higher. Expect this wide sweeping congestion to continue. Algorithms are short
Hedge Recommendation: Hedged
Position: Short 100% - Observing new congestion pattern.