March 29, 2021
Cattle Market Roadmap
During the past year we have seen enormous bull moves in a number of markets. I believe many of those bulls have either ended, or at a minimum, are now in the midst of quite large retracements or consolidations…and one of them, the Soybean market, is at the top of my list to be short (more on that in my next newsletter). But, as I have noted repeatedly of late, there is one major commodity sector that has yet to “GO,” and that is the Cattle Complex…but I absolutely, rabidly, believe that is about to change, in a VERY big way. As always, I might be dead, dead wrong, but WITH FEEDER CATTLE HAVING MADE NEW 1 YEAR HIGHS TODAY, I THINK THE CATTLE MARKET IS NOW TRULY BEGINNING TO LIFT OFF…and specifically, WE FINALLY ARE ABOUT TO SEE FEEDER CATTLE DO WHAT SO MANY OTHER MARKETS HAVE ALREADY DONE…and that is, GO RELATIVELY STRAIGHT UP.
I long ago concluded that the smaller the market, the greater the odds of increased volatility and quite large moves…in that big players, especially all the Hedge Fund money sloshing around the investment world, can obviously affect prices more dramatically in a small market than a big one…which is why I have often stated that, as “smaller” markets, Cattle and Hogs almost routinely seem to make some stupefyingly big, non-stop, one directional moves…including what has JUST been happening in the Hogs…and is precisely what I am now looking for in Feeders.
In reality, the two charts following are the epitome of what I years ago came to regard as THE highest probability trade there is…that is, a LONG sideways move, with a repeated top at more or less the same level, that puts eventually puts together an upward slant…and then finally breaks through on the upside. The first of these, April Lean Hogs, is that “perfect chart,” and has already made its move …The second, May Feeder Cattle, with its even lengthier consolidation looks even more bullish than the Hogs several months ago, and I believe, IS JUST GETTING STARTED…
Now compare this to the current May 2021 Feeder Cattle…
Again, though it does NOT mean Feeders will do what Hogs have done (in other words I might be dead, dead wrong), in my experience the next most likely development tends to be a LARGE and relatively FAST move to the upside…and that IS precisely what I am positioning for .
They will have big up days, and big down days, and days with wide swinging ranges in both directions, but ultimately, I think you can be looking back several months from now and thinking, “Look at that. In the end it just kept going and going and going…and all you had to do was get long, and STAY long.”
And obviously, it’s not just about the charts…and money flow (which is a BIG part of it)…It’s also that I think the economy is beginning to SURGE…and when you throw in all of the stimulus packages that are coming…? And that people are beginning to live again…? And restaurants are reopening…?AND my belief that the hedge funds are, or will be, getting on the ONLY major market that hasn’t taken off?...All of the above only suggest one thing to me…BULL MARKET IN CATTLE.
My reference to a Cattle Market Roadmap is directly related to this concept of the “perfect chart” AND the fact that for the past year we have been seeing tremendous percentage moves in SO many markets…and I don’t think that will be changing…With this in mind, my “roadmap” is to be expecting moves that ARE big and ARE kind of non-stop…and DO go further than you might imagine…And of course you do have to get off at some point…but I want to do everything I mentally can to STAY on markets that are working for me.
I swear…Big moves are the norm now…And I think this one is happening NOW…Give me a call if you want to participate.
All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.