July 17, 2024

I continue to regard the Cattle Complex as a massive short and therefore recommend…into this recent relatively quiet past few months…buying puts in both Feeder Cattle and Live Cattle. As what I can only regard as a giant top having been formed over the past 9-12 months, my opinion has  become doubly firm that we will see at least a 25% decline during the next 6-8 months…and truth be known, considering the sky high levels we are currently trading, I would not be surprised to see it be more like 30-35%. In Feeders, 30% translates into about a 75 cent move or $37,500 per futures contract…and in Live Cattle, about a 55 cent move or $22,000 per futures contract. Both of those estimates are based on observed bear market historical tendencies for both contracts going back 50+ years…In a nutshell, even when trading at “normal” price levels, 20-25% 3-5 month declines have been ROUTINE…and I would offer that, again, the current stratospheric prices are anything but normal…and firmly believe that the Bear Market that is dead ahead will be anything but “normal.”

Nothing is absolute about any chart but histories do serve a purpose…and what follows here are comparisons between the current October Feeder contract and some similar “looks” during the past 20 years…which are part of my immediate view that today’s market is just a few decent down days away from beginning an outright collapse. Obviously just because all of these examples led to large downswings does mean it will happen again…but that IS my bet. I ADAMANTLY BELIEVE THAT RIGHT NOW IS THE TIME TO BE SHORT…BEFORE YOU’RE READING ONE OF THESE NEWSLETTERS WITH A HEADLINE SOMETHING LIKE, “CATTLE DOWN 9 CENTS TO START THE WEEK.”

And as I repeatedly point out, you can just book it that before these moves started, and even after they had begun, all of the analysts and talking heads would have been preaching NOTHING BUT all the “bullish fundamentals.”  It is ALWAYS like that…The whole trading world is still stuck on the bullish story when the collapse comes…

As always, here is the big picture…

Buy this option here…

And ditto all of the above for Live Cattle…where I am buying puts in tandem with the Feeders…

Here’s the put I’m buying here…

$3100 for 1 put in each market. Do the math of what it gets you if I am just half right. And obviously, if I am wrong, you could lose 100% of what you put on the table…But I will take a bet like this all day as I know that short trades like this…at prices like this…are about as high probability as it gets.

Thanks…Call me if you “get this.”

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Feeder Cattle, Live Cattle