Ags topping out? Unemployment at 8.2%

  • Posted on: July 6, 2012

Both Beans and Corn finally broke out above their trading ranges 2 weeks ago in a powerful bull move.  I have been too busy, quite honestly,  with the rally to write any thing worth while.
Today is Friday July6th.  We have had a 2.07 cent rally in CZ corn in 14 days, with some profit taking here going into the weekend.  I had bought some 11 cent calls 3 weeks ago, and most of them I got out of with a double or a triple.  One of my clients held them and sold them today for 1.30 after buying them for 12 cents.  This is a trade that some other advisers would hold up and parade as business as usual.  I am not that arrogant.  For most of my clients, I exited those at doubles, or have rolled up 3 times now, taking out about 3K.  If it keeps rallying the next 3 weeks, we’ll keep rolling up and taking profits.  Only time will tell where we will be a week from now if we don’t get some rain.

One huge caveat:  The Chicago Tribune today finally ran a full page story on the front of the business page about grain prices and the drought.  This is a warning sign. Since I started trading in 1987, any time I have seen a big story like that in the paper, it generally signifies a huge turning point.    People who never would dream of trading commodities will be looking to partake in this market.  From my perspective, this is a chance to get short and make very quick profits on the downside when the correction comes.
Markets go down 3 times as fast as they go up, generally.  I don’t care if its corn, wheat , beans,  greasy wool,  tulips, collectible Ferrari’s,  or most recently,  real estate.

 I am cautiously bullish, because the trend is powerful.  However, at the close of each day I am looking for opportunities to buy cheap out of the money puts looking for the inevitable correction.

As for the stocks, today we got official news confirming what anyone with a pair of eyes and ears has known for quite some time.  If this is a recovery, its a jobless recovery.  While no sitting President has ever been re-elected with unemployment above 8%,  I’d say be careful of those bets.  There’s a first time for everything.  And, combined with our President’s ability to blame every thing bad on Bush, it will be interesting if people will buy that argument.  If they do buy it, then we won’t have a change in Washington.

The market did not like 8.2 percent unemployment and just 80K non-farm jobs created in June. 
Not surprisingly we were nearing the top of the 1000 pt trading range I have been writing about now for about 9 months.  To have Dow Futures only drop from 12,917 down to 12,640 and then rebound to 12,750, probably is seen as a victory for the bulls.  I would not be interested in buying the Dow futures until it approaches the 12,500 level and then the 12,300 level.  We’ll level out.  The market is a futures market. It’s discounting the noise looking ahead.  Quite frankly I don’t see why we couldn’t go down to 11,900. That would be a nice panic low, most likely coming in August when 1/2 of the world is on vacation, and the pros can push the thin markets lower.

So that’s about it. I am going to write more specifically after I have Sunday night to see how these grains open.  For now, I’d be flat looking for rallies to trade.

Have a great weekend.
CER