September 22, 2015
I will be leaving for Chile on Thursday, September 24 and will not be back in the office until the afternoon of Wednesday, October 14. Aside from accompanying my lovely wife to her 40th high school reunion, we’ll be doing some incredible geographic sightseeing (at 12,000 feet) as well as meeting what feels like a 1000 of Dorka’s aunts, uncles, cousins, nieces, nephews etc. (big families down there), most of whom I haven’t seen in over a decade.
As usual, Rick Sitten and Willie Adams at Benchmark Financial here in Atlanta will be handling my accounts while I am gone. Like myself, they have both been in the business for over 30 years (We all started at Merrill Lynch together) and will be able to help you with anything you need regarding the markets or your account. While I will not be following the markets minute by minute (this will be a vacation), I do intend to routinely monitor what is happening and intend to make this trip a bit of a dry run for some day being able to truly operate my business while on the road…by which I mean…If I do see something that I think needs to be done, thanks to the miracle of the internet, Skype and the fact that everything need for trading the market is always right on this screen, I will be able to communicate with you and execute orders no differently than if I were sitting here in my office.
HOW TO CONTACT BENCHMARK…OR ME DIRECTLY.
Until I return, if you dial my normal numbers (Toll free, 866-578-1001 or local, 770-425-7241) the call will be forwarded straight through to Benchmark…or…You can just call them directly at 770-454-1880. Again, they will have all necessary information regarding your account.
However, if you do want to talk to me, whether about the markets or just to say hello, please feel free to call my cell at 770-366-3070…Just understand that I won’t be staring at a screen all day so don’t expect me to know “Why stocks are down this morning”, and also, that I will sometimes be in areas (like in the Andes) where there is no phone reception, so if you do get my recording, just leave a message and I will get back to you as soon as it becomes convenient.
Current Firmly Held Opinions
Keeping it brief…
Still Long the Eurocurrency
I continue to believe this market has explosive potential on the upside with a target somewhere in the mid 120’s. As I see it, the Euro made its low back in March…with speculative traders holding their biggest short position EVER…and has been building a significant upward slanting bottom ever since…Basically however, this market had been dead sideways since January which I believe increases the odds a big move is coming...one way or the other so…I continue to recommend using the 1 call & 1 put approach (as I actually recommend with EVERY position I now take).
Even when this market has just been trading sideways, the swings have been 5 to 9 points wide…and I therefore think an 8-10 point breakout from the recent range, and a trade up to 123, would be EASY to see…
Still Short the Cattle
There are times when the market have nothing to do with perceived realities…when analysts and traders just can’t explain what is happening…but the bottom line in Cattle is, WHATEVER THE SUPPOSEDLY BULLISH FUNDAMENTAL STORY HAS BEEN, all you need to get a downward “shift” in prices is a 2-3 week period where there are PLENTY of people who need to sell their animals…but buyers have already totally covered their needs in the future (due to the bullish “story”)…and the result is a kind of dead straight down drop as buyers want nothing, almost at any price, and sellers start losing MORE and MORE money on every steer they own…and find themselves in a “forced to sell” mode AND in a position where they have to do so at worse and worse prices…It’s not pretty. And nobody who is in the Cattle business wants to believe or accept it…but that’s just how it is. I’ve seen it over and over and over…not just in Cattle…but in every commodity we trade.
Maybe I’m dead wrong but I fully believe that is where we are now…when the whole bullish cattle game has truly JUST BEGUN to unravel…and after building a yearlong top, the Cattle market is now on its way down to levels that everybody in the industry currently would think impossible…And furthermore, this move will be ongoing until probably sometime next summer. The bull market went on for maybe 4 solid years…so I say it doesn’t make sense to expect the current bearish phase to be over and done within a matter of months…In fact, it could last several years…That’s just the way this stuff goes.
No, I don’t hate Cattle. I just believe this is a bull-market-is-over situation that I’ve seen innumerable times in this business…and I see the entire Cattle Complex as a MAJOR, MAJOR SHORT. Markets do tend to fall much faster than they go up and I absolutely see this as a monster potential trade.
On the chart below, the break into new lows looks to me like a classic failure…And I DON’T know what is going to happen but having looked at maybe a million charts in my career, I DO know this chart does exactly resemble a set up I’ve seen too many times to count (really), in which a “drift lower” suddenly accelerates into outright crash mode…and in this case, before you can blink, the market is 30-40 cents lower…Again, No, I don’t know what’s coming…but as a trader, I am personally positioning for exactly that…I want this on, as big as I can handle, while I am in Chile…and the truth is, I would love to come back in 3 weeks and not have even taken a look at it. As many of you have often heard from me, “Put it on. Don’t watch it. Just let it happen”. I truly believe that…And I MAY BE DEAD WRONG BUT I DO THINK THIS MARKET COULD EASILY BE 25-30 CENTS LOWER BEFORE OCTOBER GOES OFF THE BOARD ON OCTOBER 30TH.
Believe me…What I’ve drawn here CAN happen...So far, this has been a "quiet" descent...with no obvious signs of panic in the market’s price action nor in the media…but I sense it is coming. And as I have often pointed out, the meat markets semi-frequently make what I would classify as some truly mind boggling, one directional, enormous NON STOP moves (look at the bull move last year)…and that IS what I think is dead ahead. I DO THINK THIS MARKET IS HEADED FOR 150…AT LEAST….AND IN A HURRY.
Still Long Soybeans…and Wheat
The truth is, I still want to own all four major row crops (Corn, Cotton, Soybeans & Wheat) but currently only hold positions in Soybeans and Wheat. Like the Eurocurrency, and seemingly all the markets during the past 10-12 months, the ag markets have basically been trading sideways in an atmosphere in which traders and analysts appear to be OVERWHELMINGLY bearish…and of late, are unanimously citing big crops and “China Fears” (??!!) as reasons why you’re nuts to be looking at the upside. I disagree. World demand for all of these crops will continue to set historical records and supply HAS to keep up…and every grain markets bottom I’ve ever seen feels pretty much like this one. Three years ago, when prices were sky high, just about every analyst on the planet LOVED these markets on the upside. Now, with all four of them having dropped by over 50% in value, all those same guys are now telling you, “The fundamentals are bearish”?
I BELIEVE CORN, COTTON, SOYBEANS AND WHEAT HAVE ALL MADE MAJOR BOTTOMS AND ANTICIPATE MAJOR UPSIDE MOVES IN ALL OF THEM…BEGINNING, LITERALLY, ANY DAY NOW.
Here are my current recommendations in Soybeans and Wheat…Both markets are in what I would say are “won’t stay here” mode…That is, they are either a buy (defying 99% of the analysis I’ve seen), or they are going to roll on lower…which is PERFECT for the 1 & 1’s I’ve outlined in each of them.
See for yourself…I think these are great numbers…WHICHEVER way the markets want to go…But make no mistake: I THINK THEY ARE BOTH GOING SHARPLY HIGHER OR I WOULDN’T BE IN THEM.
To be clear, what you see here is the Soybean market just trading sideways…in a $1.50 range…the point being, when this market IS going somewhere, a $2-$4 move is NOT a big move…A good one, for sure, but NOT big…So I am very comfortable in drawing in the possibility of seeing it at $11.00, which would be nothing more than a $2.25 move from current levels…On the flip side, if we have not made the lows, seeing a pop down to $8.20 or so doesn’t look hard at all…in which case we WOULD get 100% of the $2372 back and then reposition with maybe the 930 calls and 910 puts…In other words, we WOULD own the market at better levels.
In Wheat (next chart), I would note that the Funds are once again short at near record levels…which was the case back in late June when Wheat rallied $1.25 in the space of 7 trading days…Not to say the same thing is going to happen but the stage sure looks set that way again. I know they must be out there, but NOBODY I’ve seen is talking the bull side of this market…All I see and hear, over and over, is “big world supplies” (again, same as every commodity bottom I’ve ever seen).
Okay that’s it…I LOVE all four of these trades…especially using the 1 & 1…I think they are all primed to MOVE (the last quarter of 2015 may be QUITE different from the sideways action since January)…and considering how all four of these markets CAN move, when I look at the costs of each of the positions recommended here, all I find myself thinking is: Big Moves. Big Leverage. Big Potential. For real. That’s how I see it…You put them ALL on and see what happens.
If you’re interested (or if you just want to catch up with me before I hit the trail), I’ll be in the office tomorrow…and Wednesday morning.
Cheerio..and Hasta Luego Amigos,
ALL OPTION COSTS IN THIS NEWSLETTER INCLUDE ALL FEES AND COMMISSIONS.
FUTURES TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE WILL BE SIMILAR TO PAST PERFORMANCE.
The author of this piece currently trades for his own account and has financial interest in the following derivative products mentioned within: Eurocurrency, Feeder Cattle, Soybeans, Wheat