In a July 2008 Commodities Trends article I discussed a powerful, longer-term trading tool designed to determine the direction of the stock market in general, the Dow Jones Industrial Average in particular. This methodology has accurately identified virtually every major trend in the Dow over the past 100 years.
George Kleinman
It’s wise to study the lessons Jesse Livermore left us–lessons that he used to make his fortunes, lessons that, had he followed them to the end, would have made “Jesse Livermore” a household name at the time of his death.
During years when the February cattle futures contract is trading at a discount to the April contract in the early fall, the February contract gains on the April as we move from the end of one year into the beginning of the next.
It’s not easy to buy a market at a new high price, and this is where the fear comes in. The timid trader won’t even consider such a play. And this is exactly what I advocate as the next big trade.
The global economy has been deflating, and when this process is complete the opposite will take place. With the unprecedented expansion of the money supply, there will inevitably come a time when the velocity of money will come back and cause greatly accelerated inflation.
There’s a spread I truly like right now because it’s setting up for a profitable play from three distinct vantage points, technical, seasonal and fundamental.
I see a price squeeze setting up in the July soybean contract as it heads toward expiration. A price squeeze occurs when the shorts (who are obligated to deliver a commodity) can’t find the product to deliver and instead must “pay up” to get out of their short position. This is what happened last September.
Because of low prices, farmers in the cotton belt, which includes states such as Louisiana and Mississippi, planted the lowest cotton acres in 25 years. Lower acres equal lower supplies; add in a small carryover of supply from last year’s poor crop and supplies at the tail end of this crop are projected to be the smallest in seven years.
Why do so many people sell at the bottom, or buy at the top? It’s because they’re acting emotionally instead of intellectually. There’s one simple way to avoid this: Don’t get attached to any position. Trading shouldn’t be an ego thing. There’s always another market tomorrow, and another yet the week after.
A dramatic weather event last week in the Southern Plains could significantly influence future wheat prices. An untimely hard freeze no doubt caused crop damage and killed a portion of the immature wheat crop.
