August 12, 2020
As I often note, the meat markets (Lean Hogs, Feeder Cattle, Live Cattle) routinely make some astoundingly big one-directional moves… in other words, relatively straight up or straight down …and I firmly believe that is what we are beginning to see in Cattle…and will see in Hogs.
In the face of supposedly overwhelmingly bearish fundamentals (due to Covid, we have weak demand, too many heavy, heavy cattle, and too many consumers out of work), CATTLE MADE NEW 5 MONTH HIGHS TODAY…
As referenced in previous newsletters, I continue to believe we are about to see the same sort of dynamic, QUITE large bull moves in Feeders and Live Cattle that we have seen in a number of other commodity markets…And my personal intention is to BE in both of these meat contracts…and to STAY in them with my expectations being precisely the sort of moves I have penciled in on the charts below. It goes without saying that I might be dead wrong…meaning that if you follow me, you could lose what you invest…but my current mentality here is one of fairly loading up as much as I can. I THINK BOTH OF THESE CONTRACTS ARE IN THE BEGINNING STAGES OF BIG, BIG MOVES.
I’ll get to them specifically further down but here’s a bit of perspective about the current markets and trading in general…
I have done this a long time…40 years this month…and in spite of having been both an idiot and a genius on countless occasions, here are two things I know:
ONE GOOD TRADE IS ALL IT TAKES---It’s amazing how getting on a trade, and staying on a trade that DOES GO (finally), can just explode an account (positively) on the upside. We are dealing with heavy leverage here…which obviously can work against you (losing fast)…or the opposite.
THE BEST WAY IS GOING WITH IT---Quite simply, get on something that IS moving, that IS pointing in a direction…and just go WITH it, fully understanding that it could stop at any time, but also knowing that, over and over and over, markets often GET going and KEEP going…easily 3 or 4 times as far as you ever thought possible (for you or against you). And when they are going for you, and you do just sit tight? The numbers can get crazy.
As I have written for a while now, I think we are in a massively liquid financial environment (provided by the Fed) in which NO markets are just going to lay around sideways…and that when any market DOES start moving, WHATEVER the commodity, the moves are going to be big…which is why my current approach is to get on markets that “look like they are breaking out,” (GOING WITH IT) and concurrently make the assumption that the ensuing move will be quite big (sitting tight on ONE GOOD TRADE)…So, yes, I am in these ideas for grand slams…fully understanding that I, or you, can lose every dollar that is on the table…but also knowing how big the profitable outcome could be.
Honest to God, I wish I could take my positions in the markets recommended here…and then not see them again for another 2-3 months. For real. Not to watch them at all…Just have somebody at ADM call me up in October and say, “Hey. These contracts are expiring. You have to get out.” And then see what I had made…or lost.
These three contracts look like they are BREAKING OUT ON THE UPSIDE…
At this moment…Feeder Cattle, Live Cattle and Soybean Oil are exactly what I have been talking about here…All three appear, in my opinion, to be LIFTING OFF, and believe me, all three are accompanied by hordes of analysts who are overwhelmingly bearish…which I absolutely consider to be resoundingly bullish.
But first, here are three quick looks again at moves we have recently seen…all of which are examples of what I am more or less expecting to see in Feeder Cattle, Live Cattle and Soybean Oil…As always, it doesn’t mean they WILL do the same…by no means whatsoever…but something along these lines IS what I am personally in the trade for.
Yes, this next one has kept going...And yes, this is an extreme example of what I am looking for in other markets.
And here are the trades I’m making…as I think all three ARE breaking out on the upside…right here and right now. I think they are all about to see strings of up days with a few down days scattered in between.
I’d also ask you to note what these market have been doing…which is grinding higher, for months…in spite of, I assure you, NOTHING but bearish rhetoric from analysts everywhere…in spite of NOTHING but supposedly “bearish fundamentals” being touted day after day, month after month by just about everybody I read who opines on the ag markets…and I mean EVERYBODY.
I think all three of these contracts are about to become some version of Lumber, or Milk, or Copper, etc…
OCTOBER FEEDER CATTLE
OCTOBER LIVE CATTLE
OCTOBER SOYBEAN OIL
Doing all three would cost $2540…Do the math for yourself as to what the results could be if I am only partially right…
I’d add that the numbers using both the 1&1 or 2&1 are excellent for all three markets.
OK…I’ve been waiting…and suffering as the row crops just sat here for months…but both here in the Cattle, and in the Soybean Oil (and the Soybean complex), I think that is very definitely changing…and I DO think that all three of these markets ARE about to accelerate on the upside.
It’s not what price you get on that’s important. It’s more about WHEN you get on…and what is coming next…that is, are you buying a market that IS going somewhere…that DOES have direction? That IS about to really get going? Maybe dead wrong, but I THINK THAT IS EXACTLY WHAT WE HAVE HERE…MARKETS THAT ARE ABOUT TO TAKE OFF.
TELLING IT LIKE IT IS: No question….Most of this year has been painful and certainly does not inspire any of you to put bucks on the table…and that is ALL on me…But I urge you to just look at what I’ve presented here, and if you think it makes sense…If you can see the potential that I see here?...DON’T just watch this happen. Swallow hard and write the check. Believe me. That’s what I have had to do…
Call me if you want to talk.
And I do continue to keep my eye on Corn, Cotton, Wheat and Hogs…Just waiting to see them show me something on the upside…and firmly believe they will ALL be going big as well.
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, Live Cattle, Soybean Oil