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Redux: Be A Hedger. Be A Seller


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The data and opinions in this report are for general information use only and are not

intended as an offer or solicitation with respect to the purchase or sale of any futures

contracts. Although all information and opinions are believed to be reliable, we cannot

guarantee its accuracy or completeness. The open trade and previous recommendations

were suggested, but that does not necessarily mean any individual followed the trades

exactly as recommended. This newsletter has been prepared without regard to the specific

investment objectives, financial situation and needs of any particular recipient. Past performance

is not necessarily indicative of future results. There is a significant risk of loss associated with

trading futures and options. It should be noted that the impact on market prices due to seasonal

or market cycles and current news events may be reflected in current prices.

Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729

Follow me on twitter@commodityinsite

Be A Hedger, Be A Seller.

The 4th Quarter has arrived and with it, news that is clearly bearish for most commodity markets between now and the New Year. The news I am referring to is U.S. debt markets are beginning to leak and leak badly out of fears that inflationary pressures are building to the point the Federal Reserve will soon hike interest rates. Based on history, higher interest rates is bearish commodities per se. History also shows that if rates rise high enough, it is bearish stocks, shares, equities and the Dow Jones.

Lets take a quick look at how the Big Four, stocks, bonds, currencies and commodities did in the first 3 Quarters of 2017 before trying to guess what the 4th Quarter will bring forth.
Stocks: The first 3 Quarters of this year were very bullish stocks as new all-time historic highs were posted. The S&P for instance, this week posted its sixth record close, the best performance since 1997.


Bonds: The bond market moved sidewise in a relatively tight range until September when the market spiked upward to a 7 month high but over the past 6 weeks has since come back to the lower end of trading range for the year.


Currencies: The US dollar index, the most important of all currencies posted a high in early January, rolled over and a month ago fell to levels not seen since 2015. The dollar has improved in the past month and if the debt market grind lower yet, the dollar should catch a stiff bid into 2018.


Commodities: The CRB Index, that is to the commodity markets as the Dow Jones is to the stock market hit the yearly high in January, fell to a yearly low in June and by the close of this week tumbled badly.


The first 3 Quarters of this year were wildly bullish stocks but in my view, perfectly neutral for bonds, currencies and commodities. Of course, there were some rallies at times with bonds, currencies and a number of commodities such as grains, livestock, petroleum and metals but when all was said and done, they are back to trading near the yearly lows. The rallies died quickly.


But today, the Labor Department released an Employment Report that showed the economy lost 33,000 jobs last month rather than creating 75,000 as predicted. The loss of jobs was the result of hurricanes, Harvey and Irma. The job losses were the first contraction in seven years. And at first blush, such data would suggest the Fed will not be so eager to raise interest rates.


However, digging deeper into the data, here is the big news regarding the jobs report. According to Market Watch, with a headline, Traders focus on fatter paychecks, ignore payrolls drop in jobs report they wrote, The recent extreme weather in the U.S. has caused jobs to be shed. But what the Fed will be really pleased about is that wage growth has been strong. Its pretty hard to see how the Fed wont hike in December now, said Luke Hickmore, senior investment manager at Aberdeen Standard Investments.


Prior to this weeks jobs report, the U.S. debt markets were already grinding south and interest rates north. The 30 year Treasury bond market and the 10 year Treasury notes fell to levels not seen since July while the 2 year Treasury notes fell to a 9 year low, a level not seen since 2008. History shows that when bonds, notes and T-bill values move south, interest rates move north and the only market to benefit from such a scenario is the US dollar.

My newsletter, Commodity Insite is published twice a day. The first broadcast comes out around 6 a.m. Chicago time and again around noon. If something happens during market hours that I view as important I follow up with a Special Email Alert to my subscribers and brokerage clients. Each day this week and before the jobs report showed an rise with wage growth I stated the following. My lean for the 4th Quarter of this year is that of a bear. I envision a scenario quickly unfolding where the commodity markets drop sharply along with stocks into 2018. The fundamentals unfolding with the debt markets leaking badly while the dollar is improving is bearish. It may, however, prove to be more bearish commodities than stocks but it is still a bearish scenario.


As we move further into the final quarter of the year, grain and livestock producers should be selling or hedging expected production. Do not allow todays prices slip away. Hedge, sell aggressively and keep in mind that the Fed will hike rates sooner than later and that is bearish virtually every market on the board.

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It is now Sunday, October 15, 8:02 a.m. Chicago












The data and opinions in this report are for general information use only and are not

intended as an offer or solicitation with respect to the purchase or sale of any futures

contracts. Although all information and opinions are believed to be reliable, we cannot

guarantee its accuracy or completeness. The open trade and previous recommendations

were suggested, but that does not necessarily mean any individual followed the trades

exactly as recommended. This newsletter has been prepared without regard to the specific

investment objectives, financial situation and needs of any particular recipient. Past performance

is not necessarily indicative of future results. There is a significant risk of loss associated with

trading futures and options. It should be noted that the impact on market prices due to seasonal

or market cycles and current news events may be reflected in current prices.





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About the author


Jerry Welch has been in the futures industry since the late 1970's and is a true veteran of the markets. He has been quoted often in Wall Street Journal and is author of Commodity Insite, one of the longest commodity futures newspaper columns in history. His weekly column has been published each week since the mid 1980's and is one of the most recognized names in the world of commodities.

Mr. Welch is also known widely as a, "so so" flyfisherman.  

His column is published by the Illinois Agri News in La Salle, Illinois, Cattle Today, in Fayette, Alabama as well as Consensus, in Kansas City, Kansas.

He can be contacted at 406.682.5010 for a view of his, "twice a day" market column that includes price forecasts and trading suggestions.

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