HOGS, TOO LATE TO BUY?
August 27, 2019
I finished the computation for October Hogs late last Friday night, and I had a pretty sick feeling. It dawned on me that there was a very good chance that come Monday morning that the Hog market would not give me an opportunity to get long…….and I was right. So am I too late? Is the corrective rally back to balance over? Let us take a look at what our in house model tells us.
We know that as of last Friday the October Hogs closed at $58.77. The RSI finished at 34 which by definition is not oversold, and that is why we do not use the RSI. Our in house model was much different. It showed that the negative indicator had approached the third standard deviation above the 209 week average. Only once before in the last 209 weeks has the negative indicator for hogs reached this level. The negative indicator had become wound so tight that October Hogs had become reached a level of positive equivalency. That means that the market had become so unbalanced it was actually turning the positive indicator higher. To be clear there is nothing to say that the negative indicator can’t go even higher, as we know past performance is not indicative of future results. But for my money if given an opportunity I was willing to play the odds and get long. But alas my sick feeling of Friday night proved correct and the market shot out of a cannon yesterday on the opening. So the question becomes is it over? Is it too late to buy? Our in house model says no, the October Hog market remains a good distance away from the point of equilibrium. So what to do?
For the record I am not just another pretty face writing letters I do have skin in the game as I am presently long both Cocoa and Coffee and given an opportunity will get long October Hogs. My failing is that I do not do well buying rallies, in fact I am really bad at it. Consequently I will be looking for a set back off of yesterday’s move to get long…..but where. Initially I will look to see how the market acts IF it should dip back down to around the $62.00 level. Wish me luck!
My name is Lee Gaus if you would like to receive an introduction trial to our daily and weekly commentary click the link and sign up. If you have any questions you can reach me at 1-877-304-1369, 312-384-1166, or email me atlee@efggrp.com. If there is a commodity you would like me to address shoot me an email.
There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.