COFFEE, HOGS AND THE REST OF THIS MESS
August 7, 2019
I apologize for not posting earlier in the week I had some personal business that took me out of town.
COFFEE: Not much to say past what was written in my last article. September Coffee continued to drift lower last week closing down $1.60 for the week. As we know from last week’s article September Coffee will have to close above $107.10 this Friday, August 9 to avoid turning long term bearish. In my opinion it is possible but not likely. Both the positive and negative indicators are within the first standard deviation of the 206 week average. The positive indicator is below the 206 week average heading lower while the negative indicator is above the 206 week average heading higher. What to do? Given that I hold the opinion that the very likely that September Coffee will confirm a bearish trend change on Friday I suggest looking for levels to sell. Depending on your risk appetite consider selling anywhere from $99.50 to $101.50 remember the value of stop loss orders.
HOGS: Really disappointed that I was tied up with personal business because Friday’s close and Monday’s opening confirmed that our model showed October Hogs had reached a point of positive equivalency. What that means is that the negative indicator had reached such an over stretched point that it was forcing the positive indicator higher. Confusing I know but you will have to trust me on this. On Friday’s close the negative indicator had violated the second standard deviation above the 206 week average, heading higher. The positive indicator was below the 206 week average but turned and was also heading higher. Both situations were further aggravated by Monday’s opening and dip to the lows of the day. What to do? It is my opinion that one should look for areas to be counter trend long. There is no doubt that our model shows October Hogs in a long term downtrend but given its over stretched condition it may well move higher over the next month to that point of being rebalanced. This is exactly what happened from July 9 to July 23 when once rebalanced the October Hog market resumed the downtrend making new lows for the move. Again depending on your risk appetite one can consider buying October Hogs anywhere from at the market or $63.20, or the old low of $61.50.
REST OF THE MESS: It is important to keep in mind that no system, fundamental or technical, is immune to the workings of World Body Politic. Surprise announcements, tweets (Lord has it come to tweets) leaks and rumors are things that cannot be forecast. That is why we strongly suggest the use of stop loss orders that while not perfect offer you some degree of safety. It is our opinion it is better to get back in when the dust settles then to expose you to unnecessary major risk. Just a thought
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 at lee@efggrp.com. If there is a commodity you would like me to address shoot me an email.
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