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Week 2017-10-23 - APPL & ES - Bitcoin - Sugar


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This Week

There is very little to drive markets next week except the ECB press conference. Continued weakness in the Hang Seng should follow through into US markets. Continued political risk in Europe should dampen expectations

(Read this in a very sarcastic tone) OR the world is sunshine and lollypops and you should extend your risk and leverage buy every market dip. Also, sell every move higher in the VIX to double your profits.

APPL & ES

I am publishing early this week because I suggested selling the S&P yesterday and have gotten it wrong (https://www.insidefutures.com/article/2067888/AAPL%20&%20ES.html ). I thought ES would take a nice turn lower, but it hasn`t (yet). Right now, it looks like the BTFD traders have managed to hold prices. The best I can do it buy some cheap Puts and hope the trade materializes but I have low expectations in this market.

THIS IS NOT A NORMAL MARKET. In a normal market, when prices hit all-time-highs for many consecutive trading sessions, then the price pulls back. When market participants are uncertain (not scared, only to the level of not certain) then markets will often pull back. When governments remove the money printing machine that has driven markets to feverish highs, then we should expect those markets to move lower. We have all of that.

We also have Apple pulling half of their recent iPhone manufacturing order (killing half their product future sales) because of lack of demand. This has lowered expectations on their shares which have traded at a massive premium (overvalued PE) based on future sales of their overvalued products. As 3% of the S&P, and a primary company carrying the tech stock sector, it should be expected that this selloff of Apple would result in a dip in the S&P.

10 years ago, Apple news like this would have generated a dip of at least 3% on the S&P futures contract based on Apple and their suppliers moving lower. That was before BTFD and central bank money was in control of these markets. That was before Apple bought Beats By Dre for US$3,000,000,000 instead of just turning to bass all the way up on their output mixer. So if you trust this market, then put those overpriced headphones on, and BTFD. If you trade this market, then never think about this: Engineers do NOT buy Apple products.

I may sound bitter for having made a bad call. And I am salty about it. I pay my dues in cold hard cash. My losses ARE my payment in blood. So, believe me when I say that this is not a sound market.

This market SHOULD be moving lower, but it is not. Thus I must decide if I exit this market completely, to avoid such manipulation risk OR do I join the sheep and hope for the best?

Sheep get slaughtered.

Bitcoin

Bitcoin has hit all-time-highs. It will be pulling back from those highs. Before that happens, we may get a short squeeze and an extension to the recent push forward.

This is how a NORMAL market trades. This lack of blatant manipulation and intervention is why banks and governments fear such markets. They cannot do much to manipulate a market that transacts a volume of $1.5 billion in 24 hours (https://blockchain.info/stats) across every country in the world.

Another reason for a pull-back is that in November there will be a code split. In the lead up to the split, then sellers will be in control of this market. After the split, it will be a buying frenzy again. Speculators can only drive the price slightly higher until profit taking occurs before this expected sell-off. Profit taking will overwhelm speculative money, diving prices lower. We are in the zone of those profit taking levels. Anyone that has doubled their money since the last split (or close to it), will be looking for an exit and re-entry just like September price moves. So don`t be afraid to take some profits and buy back in on a dip.

Long term, the outlook for Crypto-currency is very good (As long as there is an internet, there will be Bitcoin). So if you are being lazy or don`t want to trade a core position, you can sit on your position. It is highly likely that prices will be back to these levels soon, but you will just have to ride the dip first. So pucker up for the ride.

Something to bear in mind about the long term success of Bitcoin is the need for nodes. Nodes are the computers that enable transactions to occur. Currently, nodes do not receive any compensation, only miners get paid. For the continued use and extension of Bitcoin, miners (or trading hubs) will need to provide nodes. This will one day limit the spread of Bitcoin, but that is tomorrow`s argument for you long term investors. Here is more information on that:

https://www.coindesk.com/bitcoin-nodes-need/

Sugar

"It is never too late to sell sugar." - Anonymous

Look for a lower sugar price over coming weeks. It is a good time to buy some puts or sell some futures. The March 2018 contract gives enough time to make a decent chop and still have time value left in the contract. Currently, the chart looks like it is setting up for a decent move lower. Look to exit this trade before the New Year; don`t ride it too long.

There seems to be a bumper crop of sugar beet in Europe this year (20.1M MT in 2017 vs 16.5M MT last year). As the EU likes to give farm subsidies, this will mean that plenty of cheap sugar will be hitting the world market soon. It also means that there is an expected cut to EU imports of 2 million MT. This is the first year since 1967 that the EU export restrictions have been lifted, so much of the excess production sugar is going to hit world markets. World sugar markets are about to experience high volatility and lower prices.

So it is a very good time to short sugar.

A bit of negative press might have the EU scared of giving sugar farmers too much, so keep an eye out for rehashing of this news story to put negative pressure on EU leaders:
https://www.usatoday.com/story/news/nation-now/2017/10/18/relationship-between-sugar-and-cancer-now-clearer-scientists-say/775963001/

Other References:

https://www.fas.usda.gov/data/eu-28-sugar-semi-annual-2

https://ec.europa.eu/agriculture/sites/agriculture/files/markets-and-prices/short-term-outlook/current_en.pdf

https://ec.europa.eu/agriculture/market-observatory/sugar_en

https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Semi-annual_Brussels%20USEU_EU-28_9-29-2017.pdf

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DISCLAIMER:

YOU ARE AN ADULT and must make your own decisions. ONLY YOU know what level of experience you possess. ONLY YOU know what level of risk you are willing to take. ONLY YOU know what your financial goals are, and to what lengths you are prepared to go to meet those goals. You will be the one to wear your losses, so trade with caution and do your own research.

Henry Ledyard is an independent trader. He has NO affiliations with banks, brokerages, funds, trading houses or markets. He trades for himself and posts trading ideas merely to share information. He does NOT want your money, advice or opinions. He does NOT want your unsolicited emails. If you require further financial advice, seek it elsewhere. Henry`s opinions should be considered as addled as his blog site:

www.addlepated.com.au




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About the author


Henry Ledyard is a futures and options trader with over 20 years of trading experience and over 10 years of experience in trading futures. Henry Ledyard holds multiple degrees: BE Electrical Engineering, BS Physics, and BA Visual Arts. He has worked as a prop-trader (AU bonds, USA bonds) but found the bond market not conducive to his trading style. He currently trades for himself, and has no associations with any brokerage or firms. He has no boss and seeks no money for his information and trade ideas.

Henry’s trading focus is primarily on futures with longer term trades (hours to days) in tangibles (commodities and equities) with a real world bias. This is because high frequency trading algorithms are in control of much of the arbitrage trades and short term volatility.

Henry is predominantly a chart reader who looks for direction changes to enter and exit markets and is not a trend follower or scalper (much). His trade ideas are based on broader market forces creating opportunity while focusing on over-sold or over-bought moves. To make money in markets, he has to combine timing, direction and risk which can be a challenge (and may not suit your trading style). He is not an FX trader, nor stock trader (mostly) and tries to avoid bond markets except as a spread for other trades. He also avoids ETFs and many derivative products because of exaggerated leveraged moves.

Henry is based in Sydney, Australia and normally trades EU pre-market through the USA session with the occasional eye to Asia trade for indicators of direction.

The trade ideas expressed by Henry are places he sees potential for profit and may be as addlepated as his blog site: www.addlepated.com.au

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