QUICK TAKES
October 7, 2019
December Crude Oil is something I think you will want to keep an eye on. According to my model what do we know? We know that CLZ went negative on the Friday, October 4 close. We know that it will take a close this coming Friday at or above $74.30 to reverse the trend. We know that from the Friday, September 27 close to the close of Friday last the December Crude dropped $3.05. This quick drop caused our negative indicator to violate the first standard deviation above the 215 week average and approach the second standard deviation. We also know according to our model that the negative indicator has gone to a point of Positive Equivalency (PE). What that means is that the negative indicator has gone to a point where it is so overwound that it is actually starting to give a buy signal. So what to do? There are some commodities that I would be tempted to begin buying now, but not Crude. I am willing to miss the rally and wait for a further break before buying. Those that have requested to be on the Quick Takes mailing list will get updates during the week if Crude breaks further. My Trades of the Week recommendations had the initial buy point at $51.90.
December Hogs deserve a review. Seven weeks ago December Hogs dipped to the point where the negative indicator had approached the third standard deviation above the 208 week average and signaled PE (see Crude comments for a definition). December Hogs on a weekly basis then rallied from $58.77 to $66.25 on September 20. At that point December Hogs had become rebalanced. Even so our model showed (see past issues of Trends and Reversals) the trend was still decidedly lower and further rallies should be sold. So what do we know? We know that LHZ is in a downtrend and needs a close this Friday at or above $77.87 to turn bullish. We know that December Hogs remain in balance as of this writing. What to do? I suggest looking for rallies to sell sell Trades of the Week.
December Cattle are in a downtrend but showing possible signs of bullish tendencies. What do we know? We know that by definition December Cattle are in a downtrend. We know that December Cattle need a close at or above $111.77 this coming Friday to turn bullish. We know that as of the close on Friday last that December Cattle are now in Red Alert Status (see Trends and Reversals for a definition).
We know that a close at or below $97.42 this Friday will re-confirm the downtrend and negate the high probability of a trend reversal. Ergo:
A close Friday, October 11 at or above $111.77 turns Cattle Bullish or
A close on October 18 at or above $111.45 turns Cattle Bullish or
A close on October 25 at or above $103.52 turns Cattle Bullish
What to do? Be careful because if a commodity gets this close to reversing and fails…….look out below. Armed with that knowledge I suggest looking for values to buy keeping in mind the prices from above and use stops.
Coffee has always been a favorite of mine and it seems many others. What do we know? We know that Coffee remains in a downtrend needing a close this Friday at or above $101.70. We know that eight weeks ago the negative indicator exceeded the second standard deviation of the 207 week average. This signaled PE (see Crude comments for a definition) and a rally ending with a weekly close on September 13 of $102.75.
We know that a close at or below $93.95 this Friday will re-confirm the downtrend and negate the high probability of a trend reversal. Ergo:
A close Friday, October 11 at or above $101.70 turns Coffee Bullish or
A close on October 18 at or above $100.70 turns Coffee Bullish or
A close on October 25 at or above $96.35 turns Coffee Bullish
What to do? Be careful because if a commodity gets this close to reversal and fails…….look out below. Armed with that knowledge I suggest looking for values to buy keeping in mind the prices from above and use stops.
FYI
COMMODITIES THAT EXPERIANCED A TREND CHANGE ON FRIDAY LAST
December E-Mini S&P
December Cocoa
COMMODITIES THAT ARE IN RED ALERTS STATUS
December Cattle
December Wheat
December Dollar Index
December Canadian Dollar
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.