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COFFEE, SUGAR COTTON AND HOGS


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May 29, 2019

COFFEE, SUGAR, COTTON AND HOGS

While much of the trading interest appears to be focused on the agricultural markets given the abnormal amount of rain hitting the Midwest let us visit some old friends.

HOGS Much has been said about the impact the tariffs have had on soybeans but do not overlook the impact it has had on hogs. I know I am mainly a technician by choice but one cannot turn ones back to the obvious. With African Swine Flu spreading across China and into neighboring countries the U.S. Hog market swiftly began moving higher as one would suspect. Higher into a brick wall! Between tweets assuring an agreement was at hand followed by histrionic finger pointing and no deal the Hog market dropped like deflated balloon.

So what do our in house models tell us now? August Hogs are now in a definite downtrend. We will need a close this Friday at or above $110.95 to return the market to a bullish trend. For those that chose to look at the RSI as of this writing sits at 32. Our in house model tells us that the negative indicator for August Hogs sits above the first standard deviation of the 196 week average. This means that if Hogs have reached a point of equilibrium we can expect a near term rally, but nothing major. If we have not reached a point of equilibrium we can expect the market to go a good bit lower. So what will Hogs do? It is just my opinion, given that we need a 24% rally Friday close to Friday close I am inclined to believe rallies should be sold.

SUGAR- The recent trade in the Sugar market reminds me that no model is perfect and when ones model proves to be imperfect the best thing to do is acknowledge. I hate those market anal ysts that only trumpet when they are correct, credibility comes from accepting when one was wrong and that is the case with me and Sugar. As of this writing July Sugar has reverted back to a bearish market several weeks ago and confirmed again last week. We need a close at or above 1318 to reverse the trend to bullish. The negative indicator spent a couple weeks above the first standard deviation of the 196 average. It appears that Sugar is a bit over stretched to the downside and needs a correction before boing lower. Keep in mind that Sugar needs a 13% correction to reverse the trend, if one must trade Sugar I suggest looking for higher values to sell.

COTTON July Cotton turned negative four weeks ago. Two weeks ago the negative indicator approached the fourth standard deviation above the 196 week average. On Friday last the July Cotton closed $2.40 higher on a weekly basis and that brought indicator below the second standard deviation of the 196 week average. It will take a close at or above $77.57 to reverse the trend to bullish. So what to do? This information suggests a probability of somewhat higher prices before we once again go lower. On a short term basis one might want to take a long position before going back short on the longer term.

COFFEE- I have saved the best for last, well at least my favorite the Coffee market. On May 15 I wrote, A close at or above $100.45 on Friday, May 24 will turn the trend.Failing that a close at or above $96.65 on Friday, May 31 will turn the trend higher.As time goes on through Junefailing a major breakin the market it will become progressively easier to reverse the trend to bullish.

So what to do?I suggest one begin looking at the $89.00 to $91.00 level to get long July Coffee using new lows as a stop.

As I write this I feel pretty good about that advice, July Coffee is trading at $97.75 and one had plenty of opportunity to get long between $89.00 and $91.00. As mentioned above a close this Friday at or above $96.65 will turn the Coffee market bullish. Both the positive and negative indicators are within the first standard deviation of the 196 week average. It would be nice to get a high flying zooming market higher but given the very orderly manner in which coffee went lower that might be asking for too much, patience is a virtue. I do recommend buying on breaks around the $93.20 level, and the intelligent use of stops. Trying to project where a market can go is always the hardest part but I am thinking the first major level to the upside is the $100.00 mark and then the $107.00 mark.

If you have any questions or comments give me a call at 1-877-304-1369, or email me at lee@efggrp.com. No matter how many emails I receive I will do my best to get back to you within 24 hours.

There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.May 29, 2019

COFFEE, SUGAR, COTTON AND HOGS

While much of the trading interest appears to be focused on the agricultural markets given the abnormal amount of rain hitting the Midwest let us visit some old friends.

HOGS Much has been said about the impact the tariffs have had on soybeans but do not overlook the impact it has had on hogs. I know I am mainly a technician by choice but one cannot turn ones back to the obvious. With African Swine Flu spreading across China and into neighboring countries the U.S. Hog market swiftly began moving higher as one would suspect. Higher into a brick wall! Between tweets assuring an agreement was at hand followed by histrionic finger pointing and no deal the Hog market dropped like deflated balloon.

So what do our in house models tell us now? August Hogs are now in a definite downtrend. We will need a close this Friday at or above $110.95 to return the market to a bullish trend. For those that chose to look at the RSI as of this writing sits at 32. Our in house model tells us that the negative indicator for August Hogs sits above the first standard deviation of the 196 week average. This means that if Hogs have reached a point of equilibrium we can expect a near term rally, but nothing major. If we have not reached a point of equilibrium we can expect the market to go a good bit lower. So what will Hogs do? It is just my opinion, given that we need a 24% rally Friday close to Friday close I am inclined to believe rallies should be sold.

SUGAR- The recent trade in the Sugar market reminds me that no model is perfect and when ones model proves to be imperfect the best thing to do is acknowledge. I hate those market anal ysts that only trumpet when they are correct, credibility comes from accepting when one was wrong and that is the case with me and Sugar. As of this writing July Sugar has reverted back to a bearish market several weeks ago and confirmed again last week. We need a close at or above 1318 to reverse the trend to bullish. The negative indicator spent a couple weeks above the first standard deviation of the 196 average. It appears that Sugar is a bit over stretched to the downside and needs a correction before boing lower. Keep in mind that Sugar needs a 13% correction to reverse the trend, if one must trade Sugar I suggest looking for higher values to sell.

COTTON July Cotton turned negative four weeks ago. Two weeks ago the negative indicator approached the fourth standard deviation above the 196 week average. On Friday last the July Cotton closed $2.40 higher on a weekly basis and that brought indicator below the second standard deviation of the 196 week average. It will take a close at or above $77.57 to reverse the trend to bullish. So what to do? This information suggests a probability of somewhat higher prices before we once again go lower. On a short term basis one might want to take a long position before going back short on the longer term.

COFFEE- I have saved the best for last, well at least my favorite the Coffee market. On May 15 I wrote, A close at or above $100.45 on Friday, May 24 will turn the trend.Failing that a close at or above $96.65 on Friday, May 31 will turn the trend higher.As time goes on through Junefailing a major breakin the market it will become progressively easier to reverse the trend to bullish.

So what to do?I suggest one begin looking at the $89.00 to $91.00 level to get long July Coffee using new lows as a stop.

As I write this I feel pretty good about that advice, July Coffee is trading at $97.75 and one had plenty of opportunity to get long between $89.00 and $91.00. As mentioned above a close this Friday at or above $96.65 will turn the Coffee market bullish. Both the positive and negative indicators are within the first standard deviation of the 196 week average. It would be nice to get a high flying zooming market higher but given the very orderly manner in which coffee went lower that might be asking for too much, patience is a virtue. I do recommend buying on breaks around the $93.20 level, and the intelligent use of stops. Trying to project where a market can go is always the hardest part but I am thinking the first major level to the upside is the $100.00 mark and then the $107.00 mark.

If you have any questions or comments give me a call at 1-877-304-1369, or email me at lee@efggrp.com. No matter how many emails I receive I will do my best to get back to you within 24 hours.

There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.



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About the author


Lee A. Gaus is a forty year veteran of the commodity futures industry.  After graduation from Illinois State University Lee began his professional career with Cargill of Minneapolis and then moved to Archer Daniels Midland of Decatur, Illinois.  After stints in the areas of animal nutrition, soybean processing and grain merchandizing Lee began specializing in commodity futures trading.  After being transferred to Chicago Gaus rose to the position of Senior Vice-President.  In 1992 Gaus was a founding member of EFG Group, and later International Futures Group.  Gaus has always had a deep interest in what appears to be the random movement of numbers.   Today Gaus combines old formulas with formulas of his own design in an attempt to discover fair valuations.  

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