November 23, 2009
I promise, this is not another “Godzilla” newsletter (as my partner Ed described the last one)…
This is just to say, of all the ideas I outlined last week, I still think being short the Soybean complex offers the best odds and the most leverage of any trade I see on the board…
This past week, there seemed to be a theme in the media that nothing could stop commodities from driving ever higher…to the extent that even ADM’s own analysts pretty much threw in the bearish towel, basically saying that being short soybeans was “like playing poker with a billionaire” who had all the chips. In other words, if you were short, all the speculative money that was being thrown at buying commodities would run you out of the game…Believe me, and I don’t care who it is, when markets reach the point when people are just “scared” to be short is exactly when you want to be…
On top of that, I actually found the absolutely STUPID following headline on CBS Marketwatch this past Friday:
“A reality check for investors mulling the sale of gold---$5,000, even $10,000 an ounce possible, with volatility along the way”
That sort of stuff is reminiscent of talk of the Dow heading for 100,000 that I remember seeing back in 2000…Or just over a year ago when predictions of $10.00 a gallon gasoline suddenly appeared…One of the characteristics of a top in any market is when expectations just go completely berserk…which, I swear is where we are today with this whole bullish commodity thing.
I have been waiting on another leg down in the Soybean complex for virtually the entire year...I think it is finally about to start happening…I try to keep in mind that the fact this trade has been costing me (and all of you) money has nothing to do with what results the trade will produce in the next 3-6 months…which I believe will be MAJOR percentage gains…I may be dead wrong but I still, firmly, firmly believe Soybean Oil is about to drop straight down at least 15 to 20 cents ($9,000 to $12,000 per futures contract).
On the chart following is one idea that is a little different from my typical recommendation.
Not backing off…and not just because I am bullheaded…I see NO WAY for soybeans to stay at these levels…
Thanks…call if you are interested,