QUICK TAKES
September 23, 2019
CORN: We mentioned Corn last week in Quick Takes and situation remains about the same.
So what do we know? We know that according to our model that December Corn is in a downtrend. We know that according to our model a close this Friday of $ 4.35 ¾ is needed to reverse the trend. We know that the Negative Indicator reached the point of Positive Equivalency (PE) by approaching the third standard deviation above the 210 week average. We know that as of last Fridays’ close the negative indicator had barley retraced to the first standard deviation above the 213 week average. As stated previously it is my opinion that once PE is reached it will normally take three to five weeks of market re-balancing in order to reach equilibrium. In my opinion December Corn is acting in such a manner. The $3.78 value looks like the first likely area of resistance followed by $4.00 should the $3.78 level be breached. I suggest looking for short term values to get long and we will re-examine after equilibrium. Be advised there could be turbulence after take-off.
CATTLE: In early trading the Cattle market is higher reacting to the Friday Cattle on Feed Report. Other than that what do we know? We know that as of the close last Friday December Cattle remain in a downtrend. We know according to our model it will take a close at or above $113.17 this Friday to reverse the trend. It will take a close at or above $114.30 the following Friday if it fails to reverse this week. We know that three weeks ago Cattle the negative indicator reached the point of Positive Equivalency (PE) approaching the third standard deviation above the 211 week average. We know now that the Cattle market is almost completely re-balanced as the negative indicator is back within the first standard deviation of and below the 213 week average. What to do? I suggest be patient and look for values to sell.
HOGS: Hogs continue to display the turbulence we spoke of in the past, in our opinion as some in the trade anticipate significant Chinese purchases. But what do we know? We know that December Hogs remain in a downtrend. We know according to our model it will take a close at or above $76.75 this Friday to reverse the trend, and a close at or above $78.10 the following Friday if it fails to reverse this week. We know that five weeks ago Hogs reached the point of Positive Equivalency (PE) as the negative indicator approached the third standard deviation above the 206 week average. It took four week for the market to rebalance which was finally achieved two weeks ago. We know that even though Hogs rallied nicely off the low they are still a good distance away from turning trend to bullish. What to do? I suggest staying with trend and looking for good values to sell and get short.
CRUDE OIL: December Crude provides us with a rarely seen situation. What do we know? We know that by definition December Crude it is a downtrend. But here it goes. We know according to our model it will take a close at or above $55.83 this Friday to reverse the trend, and the market closed last Friday at $57.84. In other words in case you missed it the December Crude Oil market starts the week off already two dollars over the price needed this Friday to turn the market bullish. So what to do? I am suggesting you front run the actual confirmation of the trend change by looking for values to buy. You know your risk area is a close below $55.83 on Friday.
U.S. DOLLAR INDEX: As an FYI both the positive and negative indicators of the December U.S. Dollar Index continue to remain within the first standard deviations of the long term average. Both indicators remain very volatile within that long term average, rarely peeking above the first standard deviation of the long term average. So what do we know? We know that it is in an uptrend. We know that as of last Fridays’ close it is Red Alert Status (see Trends and Reversals for definition). We know according to our model it will take a close at or below 97.372 this Friday to reverse the trend, and a close at or below 97.276 the following Friday if fails to reverse this week. What to do? I continue to suggest looking for good values to get long and go with the trend.
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.