July 28, 2020
As I’ve written for a while, I want to “Buy Everything,” but have decided that Feeder Cattle, Soybeans, and Cotton are where my focus will be from here forward…I firmly believe that all three have bottomed simultaneously and that all three are in the early stages of MAJOR upside moves…
In the current environment, I continue to think that a number of commodity market markets can go nuts on the upside…and I wish I could own them all…with my perspective being that they WILL all do something akin to what we have seen in Lumber, Copper, Milk, etc…
Following up on my observations in my last newsletter, here is a simple breakdown of the bull moves that recently occurred in those three markets...with the point being, that when markets are going somewhere, what often occurs is that in the course of 6-8 weeks, any market can “quietly” put together a large dollar value move that is built on a heavily one sided ratio of higher vs lower closes…With this in mind, on the following charts, I’ve noted the dollars-per-contract moves (AFTER leaving what I would classify as their bottoming process) and the break down of how many days they closed either higher or lower as they moved steadily (quietly) higher.
And I am looking for something similar in the three markets shown below…
Obviously, this certainly does NOT mean that the same sort of thing will happen in Feeder Cattle, Soybeans, and Cotton, but that IS what I am positioned for and absolutely expecting. In the current environment of EXTREME liquidity and tremendous volatility, I think that BIG moves…just like we’ve been seeing…will continue to be the norm.
And I will say it again and again…I WANT TO OWN ALL THREE…AS A “UNIT.”
First up –Compare the current charts of Feeders, Soybeans and Cotton to the bull market charts above of Lumber, Copper and Milk…
FEEDER CATTLE – 50,000 POUND CONTRACT
SOYBEANS – 5000 BUSHEL CONTRACT
COTTON – 50,000 POUND CONTRACT
My obvious point is that all three markets DO look very much like Lumber, Copper and Milk several months ago…And while it definitely does not mean the end result will be the same…Right now, I view ANY higher close as potentially being the first of MANY consecutively higher closes...in all three of these markets...In other words, the beginning of MAJOR BULL MOVES…and I therefore recommend buying all three of them. And I would add that quite, honestly, I think the options listed below are dirt, dirt cheap relative to what these markets either can do…or will do…during the next few months.
SEPTEMBER 2020 FEEDER CATTLE
NOVEMBER 2020 SOYBEANS
DECEMBER 2020 COTTON
I strongly recommend owning all three markets as a unit…currently totaling $3464…And whether you want these options, or options with more time…or even futures…You know the drill…Any ONE of these markets making a move can more than pay for everything else…Just go back to the charts and do the math yourself…And I would note that the obvious chart similarities between them, and a number of other commodities markets, suggests that if one of them is going, they ALL are probably going. As I wrote in my last newsletter: “While it absolutely does not mean I will be right, I think the commodities markets currently present the biggest bull market opportunities I have seen since I entered this business in 1980…following the roaring 1970’s when commodity prices went fairly crazy on the upside…”
And I still mean that, and believe that…These three markets may all become dead ass lose-every-dime-you-spend trades, but I do think buying them…right here, right now…CAN result in, no other way to put it, grand slam types of profits. Those are not pie in the sky numbers on the charts above…They ARE very real possibilities, and they ARE what I am currently---personally---in these markets for. To hit the grand slam…Been waiting. Been painful…But I do think this is finally it…where Cattle, Cotton and Soybeans LEAVE these bottoms they have formed…and truly take off on the upside…and as exemplified by the Lumber, Copper, Milk charts above…DO put together non-stop moves during the next 2-3 months. And yes, I have a VERY strong opinion…and no, this absolutely does not mean I will be right…but I honestly don’t think the risk-reward ever gets any better than this…ESPECIALLY with all the money that it SLOSHING around the markets thanks to Congress and the Fed.
Don’t just watch. Give me a call and get on…or, I’m sorry, if it’s necessary, re-up your bet.
All option prices in this newsletter include all fees and commissions. All charts are by Aspen Graphics.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Feeder Cattle, Soybeans, Cotton.