Issue #244 - Apr. 29, 2008
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I believe bull markets are born on bad news and end on good news. In fact it is bearish news that feeds a bull market once it is underway. When in a bull market and bad news comes out but the market continues to rally, you should feel comfortable that the market's strength is enough to overcome the bad news. That is a true bull -- rare indeed but real. The death of a bull market is bullish news. Feed the bull a bear to keep him alive. Kill the bull by giving him a bull.
After being long rice for 7 1/2 months, I fear the end of the bull is near. It's been a great ride! However, just recently I scaled back on my position when I rolled from May to the July contract April 18th. You that know me realize that I like to milk a position for all it's worth so scaling back was not a decision I made lightly. But rice is in the news and the news is bullish -- even Sam's Club is limiting the amount you can buy! Though I am still long, the news is out.
At this point I think it is very fitting to reprint my Trade with the President Article of January 29, 2008.
No News is Good News
Be careful when trading in the direction of the news. From my experience, if there is bullish news and I take a long position, chances of that trade working long term are not nearly as likely as if I got a signal to go long when there was no news. The best long term trades I have made are when there is no news or very little at the time the trade is entered.
The ideal situation is that news comes out once the trade is working and well under way and the trend is established. It is then that the news starts to come out. In other words, when the news is out and it supports your trade idea, it is easy take the trade. But is it profitable?
It's tough to take a trade without the news in your favor. However, if you have done your homework and you get a trading signal and there is no news, that is the trade to take. You may have just found yourself a gem of a trade. Stay with it keep your risk parameters in place and enjoy the ride!
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http://www.efutures.com/promotions/marketalert.phpStop orders on the Globex grains will be treated as a stop with limit order. Globex will assign a 5 cent limit on all corn, soybean, wheat, and bean oil. Bean meal has a 40 cent limit. These are automatically assigned on all grain stop orders, unless otherwise stated by the customer.
Ex: B 2 kweN8 852 1/4 stop. Once it hits the stop price, it is assigned a 5 cent limit price. Your order will be executed between the 852 1/4 and 857 1/4. If the market gaps through the 5 cent range it is possible your order will not be executed and will remain working at the limit price. This is to prevent stop orders being filled at extreme prices.
Apr 30th - May Barley/Canola/CBT & NY Gold & Silver/CBT Ethanol/Copper/Chi,KC,MN,WCE Wheat/Corn/Oats/Rice/NY Platinum & Palladium/Soybean Meal/Soybean Oil/Soybeans
May 1st - May LIFFE Coffee/OJ/Sugar 11
May 5th - May Butter/Pork Bellies
Apr 30th - Apr Cattle/Fed Funds/NY Ethanol, May Brazilian Real/NY Ht Oil & RBOB/SICOM Rubber/Sugar 11
May 1st - Apr Milk/TOCOM Crude Oil
May 5th - May CBT Ethanol
May 7th - May Cotton
Apr 30th - Apr Fed Funds, May Brazilian Real/LIFFE Cocoa/Lumber/TSE JGB
May 1st - Apr Milk
May 2nd - May Austral 90-Day Bills/Butter/Cattle/ICE Gas Oil/Pork Bellies, Jun NY Cocoa
There has been plenty of chatter in the market lately about whether the US dollar has found a bottom. Has it? Just like every trade, time will tell. But if you look at a chart, it seems as if a bottom is forming and with the Fed going away from talk of continuing to ease rates, the greenback should find support.
The dollar is due for a bounce. We really haven't had one for a couple of years. If indeed the market rallies off of the 7105 low, this will place a lot of pressure on all dollar denominated commodities. That's why you saw most markets take a hit today, with the energies, metals, grains all having a set back. The theme of the day...The dollar was higher. Buy the US dollar futures if it trades above 7500. Take a look at call options. Buy a September $80 call for $2000.
Over the last five sessions the US Dollar has managed to climb to its highest point against the Euro in three weeks. This recent bounce can mainly be attributed to expectations that the Fed will opt to hold rates steady after their April 29th-30th meeting. Currently, the market is looking for a quarter point rate cut, but the outlook that this may be the last rate cut for some time is what has managed to fuel the Greenback in its recent rally.
At this time, look to the statements by Fed Chair Bernanke after Wednesday's rate announcement to be the key indicator of future direction. If he alludes that they are shifting their focus to inflation, or that they are going to stand aside and let the current policy run its course, look for the US Dollar to continue moving higher.
Crude oil futures closed near a two-week low Tuesday in a general departure from commodities inspired by the strengthening dollar. Energy contracts across the board saw some of the steepest losses in a month as the dollar strengthened against the euro for the fourth time in five sessions.
The dollar is seen strengthening further over the coming weeks, as many in the market now believe the Federal Reserve will take a break from cutting its benchmark interest rate after making an expected quarter-point reduction Wednesday. Investors have poured funds into commodities as a hedge against the weakening dollar, which has been hit hard by aggressive Fed rate cuts over the last few months.
A rate cut Wednesday would temporarily weaken the dollar which may lend support to commodity prices. Traders are starting to think that this may be the last interest rate cut and we will see rate turning higher by the end of 2008.
Both crude oil and unleaded were lower after the gains from the two sessions on production outages in the North Sea and Nigeria. These situations are starting improving somewhat, BP said Tuesday that it could restore full production in the North Sea over the next few days.
EIA energy stocks are expecting a build of 1 million barrels in Wednesday's stock report. Buying July crude puts on tests of $120 in June crude seem to be the trade for those picking tops.
NEW YORK (CNNMoney.com) -- Stocks ended mixed Tuesday for the second day in a row, after declining most of the session, following a troubling report on consumer confidence and some trepidation about what the Federal Reserve will decide at the conclusion of its two-day meeting that began this morning.
The Dow Jones industrial average (INDU) fell 0.3% and the broader Standard & Poor's 500 (SPX) lost nearly 0.4%, shortly after the closing bell. But the tech- heavy Nasdaq composite (COMP) was up about 1.7 points.
Bond prices edged lower late in the session to close flat, as stocks regained momentum. Technology stocks led gainers at the end of the day, with Yahoo (YHOO, Fortune 500), Research in Motion (RIMM) and Google (GOOG, Fortune 500) advancing.
U.S. light crude oil for June delivery fell $3.12 to settle at $115.63 a barrel on the New York Mercantile Exchange, after a Scottish refinery resumed operation following a labor dispute. On Monday, oil hit a record $119.93 a barrel in electronic trading.
Meanwhile, the national average price for a gallon of regular unleaded gas hit an all-time record of $3.607, AAA reported.
COMEX gold for June delivery fell $18.70 to settle at a four-month low of $876.70 an ounce.
Other markets: The dollar rose versus the euro and fell versus the yen.
Treasury prices were flat, with the yield on the benchmark 10-year note at 3.82%, unchanged from 3.82% late Monday. Bond prices and yields move in opposite directions.
The May meal held the retracement level last week that we were looking at and sold off. If you got in on our recommendation, you caught a good trade. If you are short, look at the $321 area for support. If support is taken out, stay short and roll to July. However, if the market is supported, cover and take your profit.
For 4/29 it is recommended to buy Soy meal and sell Soy oil. Find out why Moore Research is recommending this trading opportunity.
Contact Brian for more information about this and other seasonal trades.
US Corn: 10% planted; 20% year ago; 35% average
US Cotton: 19% planted; 17% year ago; 22% average
US Soybeans: 2% planted; 3% year ago; 5% average
US Spring Wheat: 34% planted; 28% year ago; 40% average
US Winter Wheat: 21% very poor - poor; 33% fair; 46% good - excellent
Lean hog futures amassed their largest losses in six weeks on information contained in a USDA report. On Tuesday, the USDA released a report stating that Russia had banned US pork shipments from four US slaughterhouses. Currently, there is no reason given for the ban, and this is not the first time that Russia has halted US pork imports.
Recently, with the US grilling season approaching, US pork prices have surged as retailers marketed the meat as a low-cost beef alternative. In the near term, look for close-by months to come under continued pressure with any upside potential being in the deferred contracts.
The dollar firmed, crude fell and so did spot gold. Right down through a key support area and hit a three month low. Ahead of the Fed's decision as markets price in and even up before the 'expected' 0.25 rate cut, we see some liquidation but I really feel that gold will continue downward even after tomorrow. If the Fed pauses future rate cuts, the dollar will strengthen taking away the impetus for gold buying. Comex/Globex is trading at $873.30 down 22.20 and the Comex/Globex Silver is at $16.53 down 48.3 cents
Corn plantings came in lower than most trade estimates Monday on the USDA Crop Progress Report. However, most of Monday's gains were based on the numbers being lower than what the analysts were guessing. Dry weather helped to bring the corn lower on the day. Soybeans are closely monitoring the situation in Argentina, where negotiations are under way between the government and farmers over export taxes. Wheat is following corn and soybeans, but is showing signs of continued long position liquidation.
We are recommending producers buy December 2008 4.90 corn puts at 20 cents. Chicago Wheat puts at a 7.30 price level are also trading around the twenty cent range. We are also looking at put protection in the beans with 8.80 November puts running at 30 cents.
Call today to let us help you develop a marketing plan that best fits your operation.
Past results are not necessarily indicative of future results. Because the risk of loss in trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.