ALL DRESSED UP AND NO PLACE TO GO
October 29, 2019
It has been a while since I posted an article and the title pretty sums up why. Looking at the eighteen markets I track fourteen show both indicators in between the first standard deviation of the 218 week average. The following four markets Cattle, Feeder Cattle, Canadian Dollar and Cotton all show the positive indicator above the first standard deviation of the 218 week average. Only December Cattle are above the second standard deviation of the 218 week average. Historically in my opinion that the closer we get to the holiday interest in commodity trading begins to fade until into the first quarter of the next year. Will that be the case this year? We will find as the year comes to an end, but for me I am not betting against it happening again. So does that mean we should stop trading? Not at all, perhaps we should change our expectations and strategy. Let us take a look at some markets that may provide some interesting opportunities.
DECEMBER CATTLE: What do we know? According to my model we know that December Cattle are in an uptrend. We know that in order for December Cattle to turn negative we will need a close at or below $104.30 on this coming Friday. The critical Friday prices following this Friday are $103.67 and $99.75. While it is possible for December Cattle to reach all those levels and reverse to bearish it is my opinion that it is not likely. We also know however that December Cattle are above the second standard deviation of the 218 week average which suggests they may be getting short term over extended to the high side. If one is considering getting long at these levels use caution and consider using stop loss orders. What to do? Overall my suggestion is to wait for a profit taking break caused by an over extension to the top side. Once the indicators show the market is re-balanced look to be an aggressive long….using stop loss orders for protection.
COFFEE: According to my model Coffee has been in a downtrend since May of 2019, but perhaps a new moon arisin’. What do we know? We know that December Coffee is in a down trend. We know that December Coffee needs a close this Friday at or above $100.20 to turn bullish. We know that over the past several weeks the negative indicator and positive indicator are within the first standard deviation of the 218 week average. December Coffee is in a real tricky area. It is my view that over the next three weeks it is very likely that December Coffee will reverse to an uptrend. It is however very important to understand that when any commodity becomes extremely close to turning bullish and fails……..well look out below. Looking ahead according to my model a close this Friday at or below $91.20 would do significant damage to a bullish reversal. What to do? I am going to recommend looking for values to buy ergo front running an actual bullish reversal. I also suggest using stop loss orders for protection.
COPPER: Copper is not one of my usual subjects but I do watch Copper very closely as I believe it is a good barometer as to the state of the global economy. So what do we know? According to my model we know that Copper had been in an extended downtrend until the close of Friday, October 18 when the trend turned bullish. Readers of Trends and Reversals found on our website www.ifgfutures.com were alerted to this during that weekend. We know that it will take a close at or below $2.434 on this coming Friday to turn the market bearish. Possible? Sure, but in my opinion not likely. We know that the positive indicator is within the first standard deviation of the 218 week average. Be mindful that it is quickly approaching the second standard deviation. Over the last 218 weeks when Copper has penetrated the second standard deviation a great majority of time it has proceeded to or above the third standard deviation. Always? Nope, there have been a few times it did not. Will it this time? Don’t know, but in my mind I will play the odds and look for it to happen again if the second standard deviation is breached. What to do? I am going to look for setbacks to recommend buying and using stop loss orders for protection.
The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.