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June 18, 2019

September Coffee is at a critical time. According to our in-house model it remains in an uptrend needing a close on Friday at or below $95.55 to turn bearish. Two weeks ago the positive in-house indicator showed Coffee to be four standard deviations above the 197 week average. While any commodity can continue to go higher yet it is my opinion that once a commodity gets three or four standard deviations above the average it becomes very difficult in the short term to go further without a correction. That appears to be the case for September Coffee as it adjusted from four standard deviations above the 197 week average to within the first standard deviation and below the 199 day average. Simply put having readjusted and no longer over stretched to the point of negative equivalency Coffee is in position to reassert an upward move.

September Coffee is presently trading at $97.55 and does not appear to be in any rush higher to values. We know that according to the model we need a close above $95.55 to remain in an uptrend. A close above $99.00 would be beneficial to a resumption of an upward bias. So there you have it a relatively narrow range between potential success and failure.

My recommendation would be to wait until the end of the week to see if September Coffee can close above $95.55.

Corn according to our inhouse model July Corn is in a confirmed uptrend. It closed on Friday last at $4.53 and needs a close at or below $3.42 on this Friday to reverse the trend to bearish. Our in-house model also shows the positive indicator five standard deviations above the 199 week average and in negative equivalency. While Corn can still go higher it is my opinion that the odds strongly suggest a short term reversal is in order. You might be wondering why the fourth standard deviation was critical for Coffee and the fifth for Corn. Two important factors come into play. First both could have gone a bit higher yet before backing off. Secondly a look at the 199 week average shows us that each commodity is slightly different.

With Corn above the fifth standard deviation of the 199 week average I would be reluctant to take a new long position. I recommend either looking for a value to sell for a short term short sided trade, or wait for a profit taking break to get long.

My recommendation is to sell September Corn at $4.70 with a money stop pick your poison.

August Hogs continued to press lower last week closing at $80.62 on Friday, $2.00 lower for the week. It will take a close this Friday at or above $105.87 in order to reverse the trend to bullish, fat chance. Just looking ahead and attempting to determine when the odds begin to favor a reversal our in-house model suggest not for at LEAST three weeks if not a good deal longer. Our in-house model also tells us that as of last Friday the negative indicator finished three and a half standard deviations above the 199 week average. While it is possible for Hogs to go a bit lower still, one needs be cautious if entering new short positions at these levels. It is important that the $79.00 level hold and while an upside a close above $85.65 would likely indicate a move to higher values before resuming the negative trend.

My recommendation would to be to buy August Hogs at about $79.90 and a stop somewhere below $78.97 pick you poison.

My name is Lee Gaus if you have any questions you can reach me at 1-877-304-1369, 312-384-1199, or email me at If there is a commodity you would like me to address shoot me an email.

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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