March 10, 2016
The opinions expressed here are probably as strong as I ever get.
This does not mean I will be right…which obviously can mean losing money…
but my personal intention is to be as aggressive with these trades as I ever am as a trader.
ALL TRADES ARE NOT THE SAME…SOME HAVE BIGGER POTENTIAL THAN OTHERS.
I HONESTLY DO NOT THINK I HAVE EVER SEEN CORN, WHEAT AND THE SOYBEAN COMPLEX AS HAVING AS MUCH EXPLOSIVE UPSIDE POTENTIAL AS I NOW SEE IN THEM.
This is my 36th year in this insane business…in playing this world’s biggest mob psychology video game…and by this time, one would think, “I’ve seen it all “, but this never seems to be the case. I HAVE SEEN COUNTLESS COMMODITY MARKET BOTTOMS BUT I DO NOT THINK I HAVE EVER SEEN A SET UP LIKE THIS ONE.
TO REITERATE FROM EARLIER NEWSLETTERS: SPECULATIVE FUNDS ARE CUMULATIVELY MORE SHORT CORN, WHEAT AND SOYBEANS THAN THEY HAVE EVER BEEN IN HISTORY…AND IN SEVERAL SPECIFIC AREAS…WHEAT AND SOYBEAN MEAL…THE NUMBERS ARE NOTHING BUT ASTOUNDING…FURTHERMORE, IF YOU DO NOT SEE THE SIGNIFICANCE OF THE POINTS I WILL MAKE IN THIS NEWSLETTER, I SUGGEST YOU CONTACT ME AND HAVE YOUR NAME REMOVED FROM MY MAILING LIST.
Still Buying Wheat
I will keep this short (hopefully)…
Start with these two charts…
And here’s another picture that I believe substantiates the idea that this market is primed to lift off…
WHENEVER agricultural markets are on the decline, you do eventually reach a point where there just are NO MORE SELLERS…where the market is jam packed with speculative sellers who really can’t go in ANY deeper…while, at the same time, prices reach levels that are just too low for farmers to sell any more of their crop than they have to…And to oversimplify, the only way those farmers can then be induced to sell is for prices to rise…HOWEVER large current supplies may be…and I’m not talking about prices just going up a few cents for a few days…Concurrent with this inevitable (in my opinion) rise in cash prices, you DO also reach the point where Speculators really don’t have any more bullets to shoot…when their positions are so large they are fairly choking on them…and when they do reach this point (which is where I think they are now) it doesn’t take much of a turn to the upside at all (which I also think we are seeing now) to start hitting the panic BUY buttons on their computers…the result often being something like all the rallies you see noted on the Commitments chart above…And if you think these Specs are going to “win” this game against the Commercials, you are then ignoring all that history…
And then there is this news item from yesterday…
NOAA says Dec-Feb temps in 48 US contiguous states warmest in 122 yrs of records.
Aside from the erratic weather patterns being generated by Global Warming, with news like this “hottest on record” AND the fact the most recent El Nińo (basically heating up of the Pacific) just matched its record for the highest water temperatures ever, I would say the prospects for ABNORMAL WEATHER are going up EVERYWHERE…And IF THERE IS ANYTHING THAT CAN LIGHT A FIRE UNDER AGRICULTURAL MARKETS…OVERNIGHT AND IN A HURRY…IT IS ABNORMAL WEATHER…and when you put something like that together with these massive speculative short positions (which they CAN’T just exit in a day or two), I firmly believe you have a situation that can get VERY big on the upside…and like I said, it can easily do it, literally, from one day to the next…And on another note, I would also say that when weather DOES get into the markets, by the time you realized it’s become news…by the time the talking heads are citing “the floods” or “the drought”, it is probably far too late to be deciding, “I’ll get in now…You need to be there ahead of time…THE TIME TO GET ON IS WHEN IT’S QUIET…WHEN “NOTHING” IS HAPPENING…Options are also a hell of a lot cheaper then…
For sure, I do not know what will happen with the weather this spring and summer, but I DO KNOW I WANT TO BE LONG THIS MARKET, AND SEVERAL OTHERS, AND ALL THINGS CONSIDERED, I THINK IT IS FOOLISH TO BE ANYTHING ELSE.
Opinion is so “no hope’ for these markets that there is almost no premium in markets as you go further out in time…Which also makes for option prices that I think are just dirt, dirt cheap…
One more time, here is the long term chart in Wheat…and one more time, I will say that a $2-$3 rally would NOT be a big deal…especially in today’s world.
I think these are GREAT numbers…And do be aware that most of this next chart is Wheat DOING NOTHING…and I assure you that, as can be seen on the longer term chart above, $2-$3 moves are almost routine in Wheat.
And you’d better believe that the “quiet” 30 cent rally over the past 8 trading days is beginning to make some of those massive shorts VERY nervous…and my sense is this market CAN shift into a MUCH higher gear, literally, overnight…literally, any day now.
Still Buying Soybean Meal
The set up in Soybean Meal (feed for livestock) is quite similar to what we have in Wheat, so I’ll just show you the charts and numbers.
The long term look...
And here is what I would do right now…And again, if you think a $100 rally seems unreasonable, take another look at the long term chart…
As I’ve often told many of you, my opinion is but a minor part of the equation here…In the end, trading is much more about the math than anything else…or more specifically, how DO these markets move…how big they can move…and what can happen to individual option values as those moves takes place…And while I think my rationale for expecting major rallies in both of these markets is on rock solid ground, what matters more is the potential I see in these two 1 & 1’s…I truly believe that the math dictates that you do have extremely high odds of either not losing…OR…making 3-5 times your money…Obviously, if both of these markets flatline…and go off pretty much exactly where they are now…you could lose 100% of what you have invested…But I just as obviously don’t see that happening…I think SOMETHING is going to happen…and throwing in the factors I’ve shown here…AND the possibility of weather…I SIMPLY DON’T SEE IT AS BEING ANYTHING BUT ON THE UPSIDE…Maybe I’m dead wrong but this IS a situation in which I think it pays to step up…STRONG…and that is what I am doing.
Don’t just sit there. If this makes sense to you…and you have the cash to risk….Pick up the phone and DO something with it.
And DON’T just take one of them…The math says DO THEM BOTH.
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has financial interest in the following derivative products mentioned within: Wheat, Soybean Meal