Mid Month Updates

July 14th, 2009 Posted in Uncategorized

Today is the last trading day for the July grain and oilseed futures contracts. They have provided us with a lot of action -- almost too much at times, and it will be bittersweet to see them go. July '09 Wheat was born in August of 2006, and gave us a $7.00/bu range during its lifetime.  During that same period, July '09 Corn gave us a $5.00+/bu range, and July '09 Soybeans a $9.25+/bu range. Those ranges were marked with big swings, so clearly they were not for the faint of heart. Yet they did provide ample opportunity for savvy traders with disciplined trading plans. So long July '09 contracts -- we'll miss you.

Bear Flag anyone? Check out the November Soybeans chart below. Tell me if you see a bear flag? (Click on the chart to make it bigger).

I've been fooled by these before, but that sure does look like a pretty bear flag.  As I've been taught, flags tend to break out in the direction of the prevailing trend. In my estimation, a downside breakout under the support trend line should yield a $0.36/bu move minimally, and perhaps $1.20/bu move if things get carried away and we meet the measuring objective equal to the flag pole. Lots of summer left, and lots of potentially adverse weather and other fundamental and potentially bullish factors to absorb -- yet the flag is there for now.

 Let's make the recent hog recos current ... The LHN9/LHZ9 spread is dead. LHN9 LTD is tomorrow. The spread at one time was profitable, and since has fallen back into negative equity territory. Two choices - get out of the spread as a spread, and take the approximate 80 point loss. Or, let the LHN9 cash settle, leaving the long LHZ9 position. Trail a stop in the LHZ9 position looking for more upside.

The options position is long 3 LHZ9 70 Calls at an average of 2 cents. Those options are going for about .75 cents, and I think they're ok to hold onto for now.

Cattle are strong. The LCz9 had every opportunity last week to make a run to sell stops under the range, yet it held and has popped right back up. I do not see much reason, at this point, to believe that it will make a strong run to extend into a new higher trading range.  So I am looking to sell it up here in the 90.50 to 91.00 area for a penny or two to the downside.

As for the financials. We are still in a financial maelstrom in this country and abroad. Economic recovery recently inferred by the big break in eurodollar futures with maturities in 2011 beyond was relatively shortlived. In May, the EDH1 an approximate 3.25% rate, and in June that jumped to nearly 4.5%. Now it's back to about 3.25%. A big "never-mind," I'd say. Yet, I think the upside rally in EDH1 futures is due for a pullback. After which, if it holds there should be another leg up to about 97.00 (3%). And if it does not hold, and the economies of the world appear on better footing this go-round, then rates may not  return to these levels for quite some time to come, in my opinion.

Good trading, Bob