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QUICK TAKES TREND REVERSALS


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QUICK TAKES

10-14-2019

Be advised there was quite a bit of trend changing activity last week. We know that according to the LAWG 647 MODEL as of the close Friday that December Soybean Meal, December Wheat, December Cotton and December Cattle have all reversed to an uptrend. Additionally a supposed partial trade agreement has been reached where China will once again become aggressive buyers of U.S. Ag products. It is important to note there has not been a public statement from the Chinese side to confirm the statements made by the U.S. delegation. With these types of supposed agreements the devil is always in the details. If the U.S. delegation announcement proves true completed signed agreement is not expected for about five weeks. Let us take a look at several commodities.

WHEAT: According to the LAWG 647 MODEL December Wheat reversed to an uptrend as of the close Friday last. So what do we know? We know that it will take a close at or below $4.35 on Friday the 18th to reverse the trend to bearish. We know that the PI is above the first standard deviation of the 216 week average. The Negative Indicator (NI) is within the first standard deviation of the 216 week average and below the 216 week average. The PI is showing signs of moving higher, but can have dips on a short term basis. Suggestion: Look for good values to buy.

COTTON: According to the LAWG 647 MODEL December Cotton reversed to an uptrend as of the close Friday last. So what do we know? We know that it will take a close at or below $57.00 on Friday the 18th to reverse the trend to bearish. We know that the PI is above the first standard deviation of the 216 week average. The PI is showing signs of moving higher, but can have dips on a short term basis. The Negative Indicator (NI) is within the first standard deviation of the 216 week average and below the 216 week average. Suggestion: Look for good values to buy.

DECEMBER CATTLE: According to the LAWG 647 MODEL December Cattle reversed to an uptrend as of the close Friday last. So what do we know? We know that it will take a close at or below $107.75 on October 18 to reverse back to bearish. We know that failing to reverse the trend on October 18 it will become increasingly more difficult to reverse the trend week over week for the next 4 weeks starting October 25. We know that the PI is above the first standard deviation of the 216 week average and showing signs of moving higher, but can have dips on a short term basis. The Negative Indicator (NI) is within the first standard deviation of the 216 week average and above the 216 week average. Suggestion: Look for good values to buy.

COFFEE: According to the LAWG 647 MODEL heading into last week December Coffee had a good chance to reverse the trend to bullish and failed badly. While not an absolute it is my opinion that once any commodity has an opportunity to reverse the trends and failswatch out. So what do we know? We know that it will take a close at or above $108.95 on October 18 to reverse bullish. We know that while the NI is getting close to signaling Positive Equilibrium it is not there yet. We know that the NI is above the first standard deviation of the 216 week average while the PI is within the first standard deviation and below the 216 week average. It is my opinion the best the Bulls can expect over the next four or five weeks is a period of consolidation. Suggestion: Look for good values to sell.

CRUDE OIL: Last week I alerted readers to the fact that according to the LAWG 647 MODEL Crude Oil had reached a point of Positive Equilibrium and to begin looking for values for short term long sided trades. December Crude did close $1.96 higher for the week and still remains in unbalanced to the negative. Both indicators are within the first standard deviation of the 216 week average, and above the 216 week average. Suggestion: Look for good values to buy.

My name is Lee Gaus if you wouldlike to see the entire articleor receive an introduction trial to our daily and weekly commentary click the link and sign up. If you have any questions you can reach me at 1-877-304-1369, 312-384-1166, or email me atlee@efggrp.com. 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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