June 23, 2021
We have liquidated…
Cattle vs Hog Spread
Short August Hogs
Since my June 2 recommendation to BUY the August 2021 Cattle vs Hog spread, the spread actually turned up several days later and has since gone straight up every day...Having moved over 20 cents, or $8000 per spread, during the past few weeks, and with several Hog and Cattle reports coming out tomorrow and Friday, I decided to just TAKE THE MONEY. We therefore LIQUIDATED THE SPREAD THIS MORNING.
In the same vein, with the August Hogs having collapsed at the same time…and with a USDA Quarterly Hogs & Pigs Report coming out tomorrow…we have also liquidated all of our SHORT positions in August Hogs as well.
And similar to what we have seen here, I think the same sort of action IS coming in Corn and Soybeans…that they have topped and are in the process of falling apart as well.
But I think Cotton is a different story…85 cent Cotton doesn’t even compare to $17 Soybeans or $7 Corn.
ONE – And with that being said, with Cotton almost certainly (in my opinion) having lost…and continuing to lose…acreage to Corn and Soybeans both here in the USA, and anywhere else where these crops are planted in the world, I see Cotton potentially building towards another BIG BULLISH LEG from here.
TWO - Put that loss in acreage loss together with the World Economy opening up more and more and MORE…and I cannot imagine a demand scenario for Cotton that is anything but through the roof.
THREE - And if you then combine the impact of these two very basic factors, I think it is quite possible that Cotton could turn into the next Lumber or Copper type market…that is, potentially an absolute “runaway.”
And the Chart? As I recently wrote, this market has a 150% CLASSIC BULL MARKET LOOK…with the major consolidation since early February either representing a top…OR…what we’ve really been seeing is bull market consolidation that is now poised to make new highs and just GO…And I might be dead wrong but that IS what I am expecting.
So my recommendation continues to be BUY COTTON NOW.
The game plan is that if the market does fail here, which perhaps would be indicated by about a 4-5 cent sell off, the option would probably lose about 1/2 its value, or $650. If so, I would be selling it, taking the hit…and assuming I had been wrong….BUT, if it sold off, and I liquidated, and then it went back to the highs, I would be right back on it, with, I believe, the odds have jumped sky high that it was then ready to trade up 20-25 cents. Point is, it can rock around but it IS either blowing and GOING…or it quits from here…And I’m NOT hemming and hawing. I THINK IT IS GOING…AND NOW…OR I WOULDN’T BE ON IT.
One of my self-stated “wall rules” is: The Best Way Is Going With It…And this chart/trade is exactly what this rule is referencing.
I could be just dead, dead wrong, but I think this trade really is as good as it ever gets…If all this makes sense, and you have the risk capital, I urge you to pick up the phone and call me. Don’t just sit there and watch all of these markets move the way they are moving…that is…BIG.
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: Cotton, Corn, Soybeans, Cattle, Hogs