June 23, 2010
Yes, Still banging away on Soybean Oil
Still think it is a GIANT trade about to happen
Looking back at 30 years of December Soybean Oil contracts, I note that the average move, between now and expiration, has been approximately 22%, in one direction or the other. Here are the actual numbers…
December Soybean Oil-Largest percentage move, up or down, between June 30th and expiration:
A 22% move from today’s 38.5 cent close would mean about an 8.5 cent move, either up or down.
I know statistics put many of you (me included) to sleep but I also think it important to note that 26 out of those 30 years had at least a 14% move…which is another way of saying Soybean Oil “won’t stay here”.
Believe me, I am worn out with this trade, but more so than ever, I think we WILL see at least that 22% change and I unquestionably believe it will be on the downside. I still think this is absolutely the best “2 & 1” I have ever seen and am still adding to the position as I see the potential for truly sizeable profits if I am right…or, if I am wrong, the opportunity to recoup 100% of your investment. It goes without saying (but I must), I could be dead wrong, this thing could go dead sideways and you could also lose 100% of what you have on the table…
I continue to look for at least a 20-30%, and fairly straight down, sell off in the Soybean complex and therefore continue to recommend staying short the Soybean Oil, now using the December contract shown below…
Here’s some more detailed perspective…
And here’s another approach…
A few other comments/markets…
Sell Gold, Sell Gold, Sell Gold
I still think Gold is the most overvalued commodity we trade…The world is coming together, NOT falling apart, with EVERYBODY cooperating internationally to do whatever is necessary to keep the global economy moving forward…The international currency system is NOT going to be replaced by gold…Inflation is NOT just around the corner…and Gold is nothing more than the latest, greatest “story”. Like every “bullet proof” bull market I’ve seen during the last 30 years (which is all of them, many more than once or even twice…housing, oil, stocks, bonds, currencies, commodities, etc.), Gold’s fate will be the same…It WILL go down, and for this market that actually costs money to own, I think it will be in the form of an crash/avalanche…Yes, there is plenty of “woe” to cite if you want to be pessimistic about the world’s prospects, but I would suggest that 1 or 3 or 5 years from now the idea that the system today is anywhere near a “collapse” will sound totally ridiculous in retrospect.
I think Gold is a big time short, right here, having just punched a new little high...and still believe we will soon see at least one $100 down day on its way to substantially below $1000 (for starters). I mean, come on, how many times do you need to see this sort of situation…? This IS the ONLY resolutely bull story out there…This IS the hottest ETF on the board. Tell me this is not $150 crude oil or 14,000 on the Dow…or the Eurocurrency at 1.50 just a few short months ago? Tell me Gold is not the opposite of the “weak” Dollar a year or two back when every expert on the planet said it was going forever to hell…
Buy Treasury Bonds
Bonds have not backed off as far as I thought they might. Seems like every day I can still find two or three talking heads who still think bonds are in a “bubble”. I’m cautious about getting back on them exactly here but I am uncomfortable not owning them…I still think Treasuries are headed, at least, into the mid 130’s.
And I DON’T think Treasuries are going up because the US or World Economies are in trouble…There are many other reasons for an ongoing bull market in Treasuries, cited in numerous previous newsletters (http://www.crokerrhyne.com/newsletters/index.htm) if you want them...
Enough for one day…Give me a call if anything here interests you.