I communicate with investors daily trying to identify what their general position is for the economy. Though it differs from one to the next, an overwhelming majority are not too optimistic about the health of the economy. The overall sentiment is that few see the light at the end of the tunnel. By that I mean most investors sense we’ve yet to turn the corner. What I try to make them realize is that while the overall economy is yet to be back on track, there are many individual stocks, bonds, real estate transactions and commodities that offer phenomenal opportunities. Take that for what it is worth, I only trade commodities so if looking at other asset classes consult a professional. What I’m trying to relay is I see the light at the end of the tunnel for some specific commodity plays.
October live cattle were higher by 3.125 last week trading to their highest level since January. We continue to hold put spreads for clients and are currently carrying a loss. We expect an abrupt turnaround in the next few weeks and would suggest option players to get positioned short. Resistance is seen at the January high at 92.70 with support at 90.75. August feeder cattle were higher by 1.55. Resistance is seen at 105.00 and support at 103.00. Prices may in fact go higher, but it will be without my clients. If and when grains start to move higher, feeder cattle should weaken and we think that is soon. We’re not advising to get short but we don’t want to be long.
August lean hogs traded higher by 975 last week and although it is too early to definitively say we may have formed an interim top is what it’s starting to look like it. Resistance comes in at 65.60/66.00 with support at 63.25. Short term it appears prices could come down but medium and longer term we like being long.
Stocks: Equities snapped a four week losing streak in fashion with the Dow and S&P gaining all 5 sessions last week. The Dow was higher by 611 points or 7.6% getting back a majority of the losses from the previous 4 weeks. The S&P was also a gainer picking up over 60 points to close 7.1% higher. From here it looks like we will see a test of the June highs. If we get through that threshold more buyers will likely enter. If we fail to get through those levels we will most likely see some profit taking. We tend to think we’ll get through those levels and have clients currently long August and September ES calls. On a test of 950 exit the August calls and on a breakout towards1000 exit your September calls. The 50 day moving averages should act as support with the June highs acting as resistance. Support o