The big news this week was the softening on the China deal and the equities exploded on the news. The best indicator throughout all of the trade news has been the grain markets which continue to tell us there is no deal in place. Based on the action these talks will breakdown as they have done in the past.
As we conclude the holiday week of trading, it has been one crazy week. Equities are trying to breakout to the upside, Grains appear to be bottoming with Meats. Gold and the Dollar continue to go in the same direction which is unusual as well. Crude continues to churn, and we are seeing some interesting developments.
This week has been dead across the board, volume has been pathetic but if we remember price is the key not volume. Price suggests a possible there are some big moves around the corner. Volume drives markets but price decides direction.
As summer winds down we would expect some big movement, these markets should start to breakout of the stubborn patterns that they are in. The real action is probably a week away with the jobs number next Friday. We are watching closely and will keep you updated.
The Bottom Line: Emotions and opinions are worthless trying to interpret news into a trading strategy is like taking a money to you cash. Most markets are in challenging patterns and we must be patient enough to wait for them to pick a direction before guessing. The game we play is one of probability.
CORN - Had a solid week, not in gains but in the action itself. This what we call bottoming action, Tuesday's low should be the bottom and Corn should be flat to higher from here. All signs are pointing to a solid fourth quarter and beyond. We are still short because of the algorithm we use, it's close to turning but we will not guess. I have bought some longs but still net short despite my overall opinion. We will have time to participate on the way up
Hedge Recommendation: Hedged and Selling Weekly Put Spreads
Position: Short 50% - Opinion, bottoms are in but short waiting for the algorithm to change
BEANS - Look close to Corn, I know it's shocking. It’s really the same story as above, we are net short, and the action was very good. We think the lows are in however I will wait for the algorithm to change, opinions cloud judgment will sell put spreads again.
Hedge Recommendation: Hedged and Selling weekly Put spreads
Position: Short 50% - Waiting for the algorithm to turn
WHEAT - Is not quite as strong at these levels but has shown the ability to hold the lows. We are still short here as well. However, the change in direction is further away. We are short and will stay there although expectations are if Corn and Beans turn so will Wheat
Hedge Recommendation: Hedged and Selling Iron Condors
Position: Short 50% - Holding lows but could go lower.
DOLLAR - The breakout continues no matter what the Central Banks are doing. After a brief sell off the Dollar is on a run to Par and is close to making near term highs once again. We are long and buyers on dips.
Hedge Recommendation: Hedge dollars against cost
Position: Long 100% - Will sell half at PAR
CRUDE - Like many other charts and products, Crude continues to churn in a range. The break above 55 indicates it could be headed to 60. The big move we were looking for last week could be to the upside.
Hedge Recommendation: No Hedge
Position: Long 50% - Will not add
S+P - The wide sweeping congestion could be breaking out to the upside. The next couple of days will tell the story if this is a real breakout or false and the S+P goes back into consolidation. This is holiday trade. markets will be thin, and they could go anywhere.
Hedge Recommendation: Portfolios should be Hedged
Position: Short 100% - We are close to reversing
GOLD - Exploded on Monday making a new 7 year high before falling back into consolidation. We are targeting 1600 and will stay long. There is no sign of gold slowing down and Silver is now joining the party
Hedge Recommendation: None
Position: Long 100% - Sold half at 1550
FEEDERS - Are still in consolidation at the bottom end. They are in danger of breaking to the downside however we remain long and look for these levels to hold. We are buyers for now, if Feeders break much lower, we will reverse.
Hedge Recommendation: Hedged
Position: Long 300% - Long Algorithms long
FATS - Are starting to look good again and look like a rally is on tap. 99 is solid support and we expect a run to 104 and higher. This consolidation pattern suggests the bottoms are in and higher prices are coming.
Hedge Recommendation: Hedged
Position: Long 400% - Looks like a rally is starting
HOGS - Once again it looks like Hogs have found a bottom and could be headed back up. Hogs have a lot of work to do for the algorithm to change but the initial setup looks to be in place.
Hedge Recommendation: Hedged
Position: Short 50% - Looking for the market to turn
