Wheat "ease"

See how easy that was? Back on 6-19 I wrote about how the wheat chart was looking constructive and ripe for a reversal.  Seasonality be damned as the wheat speculators have been out in force driving the price up to my target and even higher, more than 20% in two short weeks.

Is this sustainable? Not likely but it doesn’t mean it’s done as the markets can stay irrational longer than you can imagine. I would love to see this pullback, create a higher low as it would then allow those that missed out another opportunity to enter as it looks like it wants to run for a while. Congratulations to those that took the trade but it’s time to heed one of our sacred investing rules of not letting a profit turn into a loss so consider taking profits and/or tightening up stops.

June 2017 Charts on the Move

With the first half in the books, where are we headed?

Let me know what you think. My current thoughts can be viewed in the video link below

https://youtu.be/jo5X7DBkJBE

Gluten Free Investing

The past 5 years investing in most commodities has been a losing proposition (unless you were short). Of course there will almost always be a handful of exceptions to every broad generality in addition to the counter-trend bounces that nimble traders could capitalize on in every commodity during any long term decline. Wheat has been no exception as you can see in its chart below as its price has fallen almost 60% since 2012.  Whether this is due to the general price deflation in commodities we have seen or people shunning wheat due to the gluten free craze we will never know. But its recent activity has grabbed my attention.

Not only did price break above the 5 year downtrend but has formed its first higher low and has held above a newly rising 200 day moving average. A close above the blue horizontal line would not only indicate a break out from significant resistance but would also create its first higher high. Both of these signals are required for a putting in long term bottoms and the potential eventuality of an invest-able trend reversal. While these would be constructive developments there is still a short term headwind that may delay any near-term breakout as we can see in the seasonality chart below.

Over the past 5 years, the next two months of July and August have been some of the weakest for the price of wheat as only one of those years have had higher prices at the end of the month than at the beginning. So, is this a showstopper?

As with virtually every investment opportunity, if you are doing a complete analysis there will always be risks and arguments to be made against committing your capital. For me, price is first while everything else is a confirmation indicator only.  So, regardless of whether seasonality is a head or tailwind I will only be adding wheat to my portfolio if price first breaks above the area of strong resistance indicating it’s safe to enter the water as the bulls are in charge … at least temporarily.

Chicken Anyone?

Back on March 1 I wrote about the charts warning of higher beef prices possibly throwing a monkey wrench into your summer BBQ plans.  At the time the cattle sub-index was trading at $65 I wrote …

Interestingly, a break and hold above the (blue horizontal) neckline will be technical confirmation the pattern is in play and the upside target is right back where it was at my original post in 2015, $80.

Here we are 4 and half months later and the upside target was reached as you can see in my chart below. With the upside target met, I would consider banking partial or complete profit on this trade. As you can see, it is forming negative momentum divergence which, once confirmed, warns of weakness ahead. We have to be open to the idea that a break and hold above the 80 level provides ample argument another push higher is probable, creating a possible second divergent high. If that were to occur and I did not take profit on the entire position, I would highly suggest doing so.

Those that followed along, congratulations.  Cattle seems to be an excellent market that tends to follow its technical set-ups. As such, I would expect cattle to provide another opportunity on the downside, once this current move has exhausted itself. But until that happens you may want to look for a cheaper protein source for your 4th of July party. 

$60 Trillion of World Debt

I saw this chart posted by visualcapitalist.com and had to forward it along. While it has little to do with investing, it is an obsession of mine. I am a firm believer that one day we will have to face the piper and have our day of reckoning.  While debt isn’t evil, the level of debt we (the US) have almost fits that description. But the interesting thing is, and maybe provides some solace, is looking across the global landscape it appears as if there are a few countries/regions that may have to face the piper before we do. Ultimately though, our day will come.

As you can see the chart breaks down $59.7 trillion of world debt by country, as well as highlights each country’s debt-to-GDP ratio using color. The data comes from the IMF and only covers public government debt. It excludes the debt of country’s citizens and businesses, as well as unfunded liabilities which are not yet technically incurred yet. All figures are based in USDollars.

The numbers that stand out the most, especially when comparing to the previous world economy graphic:

• The United States constitutes 23.3% of the world economy but 29.1% of world debt. It’s debt-to-GDP ratio is 103.4% using IMF figures.
• Japan makes up only 6.18% of total economic production, but has amounted 19.99% of global debt.
• China, the world’s second largest economy (and largest by other measures), accounts for 13.9% of production. They only have 6.25% of world debt and a debt-to-GDP ratio of 39.4%.
• 7 of the 15 countries with the most total debt are European. Together, excluding Russia, the European continent holds over 26% of total world debt.
• Combining the debt of the United States, Japan, and Europe together accounts for 75% of total global debt.  Yet, combining their population they account for less than 25% of the world’s total humans