May 14, 2015
Per my recent recommendation to buy the stock market if the Dow Jones futures made new highs, as of this morning, I am now LONG THE DOW.
EQUITIES IN CHINA, EUROPE AND JAPAN (REPRESENTING 43% OF WORLD GDP) HAVE ALREADY SEEN GAINS, THIS YEAR, OF 20%, 20% AND 15% RESPECTIVELY…AND I SEE NO REASON WHY IT SHOULD BE ANY DIFFERENT HERE…OR EVEN MORESO.
A 15% GAIN FOR 2015 WOULD TAKE THE DOW UP TO 20,500. I THINK WE WILL AT LEAST GET THAT FAR THIS YEAR…AND I DON’T THINK IT WILL BE ANYTHING LIKE THE SLOW MOTION MOVE WE’VE BEEN IN FOR MONTHS...IN FACT, TO BE ON THE TOP SIDE OF 20K BEFORE WE GET TO SUMMER’S END WOULD NOT SURPRISE ME AT ALL.
In this newsletter, all option prices include all fees and commissions.
I'm not just throwing numbers out there...I think this thing can easily make a direct trip up to…and right through…20,000. And by then, the whole talking head world will be full on bullish...which I believe is simply NOT the case now.
Other markets we are in…
Wheat had a nice starting pop today…
As I recently noted, Speculative Funds have a GIGANTIC RECORD SHORT POSITION IN WHEAT...and, in fact, have built the majority of their positions during the past few months while the market has basically gone nowhere...I WOULD GUESS THAT TODAY'S 33 CENT HIGHER CLOSE HAS PUT ALL THOSE SHORTS...IN ONE DAY...IN A SERIOUS BIND. They have BIG positions that may have gone from slightly profitable to now losing money..and NOTHING would surprise me on the upside right now. Traders getting out of losing positions (in this case, buying) can be a very definite factor in price action in futures. i AM STILL BUYING.
Get long Soybeans while they are still dead in the water…and also loaded with spec shorts…
Same as Wheat, I think the massive spec shorts are going to get it handed to them in Soybeans…In reality, I look at the option prices below…and knowing what Soybeans can do…think the following 1 & 1 is just DIRT CHEAP….Big leverage in a market where $3-$4 moves( $15,000-$20,000 per futures contract) have become almost routine.
As always, I believe the best time to get on is BEFORE the action starts…before option prices get pushed up due to volatility…GET IN WHILE IT’S QUIET.
I look at the chart above and ask myself if I could ever imagine this thing just sitting there through the summer…Maybe I’m dead wrong but I say NO WAY. It either blips down again, and allows us to recoup 100% and reposition long at better prices…or SOMETHING starts happening on the upside…And again, I HAVE NEVER SEEN THE TRADING WORLD AS COLLECTIVELY BEARISH CORN, WHEAT AND SOYBEANS AS THEY ARE NOW.
Feeder Cattle have been forming a top for the last 8 months…
I AM STILL VERY BEARISH CATTLE WHICH CONTINUE TO TRADE SIDEWAYS…AND CONTINUE, I BELIEVE, TO LULL A ZILLION CATTLEMEN TO SLEEP…WITH MOST OF THEM STILL THINKING THE “LOW NUMBERS” ARE GOING TO KEEP CATTLE PRICES UP…
I still see Feeder Cattle as having topped out last October and STRONGLY recommend owning puts…whether you are speculating or hedging.
I am relatively certain that this last little rally has only reinforced everybody’s idea that “Cattle just won’t go down”. For my money, I think any 6-8 move on the downside from here will be a strong indication that the downside move is truly underway…and recovery rallies like we’ve been seeing will no longer be an aspect of this market…When they go, they go…It will be relentless…and with everybody so “trained” to think “they’ll come back somewhere”, at some point Cattle will have become an outright disaster for cattlemen…As always, maybe I’m dead wrong but this IS a story I’ve seen a 1000 times.
Give me a call if anything here interests you…
1 & 1 Forever.
The author of this piece currently trades for his own account and has financial interest in the following derivative products mentioned within: Dow. Euro, Wheat, Corn, Soybeans, Cattle