On a Friday going into a long weekend I don’t have much to say. The grains look tired, but that does not mean they can’t push higher
March options expiration saw liquidation in Beans and Wheat, but Corn continued to hold tough.
I rarely speak of cotton, but overnight developments, suggest a near term top after a rally which gave us 2.00 cotton. A large buy stop was triggered and filled overnight in the ICE market. The price which traded was technically OUTSIDE of what should have traded given market limits. As of this writing, it was as yet unclear if those trades would be honored or busted. In any event, action like that tends to signal blow off tops.
China is the worlds largest importer, exporter and consumer of cotton. They are trying to curb inflation by raising rates, but all their efforts to date seem to be less than effective at reaching the goal of cooling off their economy.
If you’ve followed my blog at all, you know I am a contrarian trader. I always like to sell into good news, buy bad news, but with risk reward parameters. There are also times when, if I can’t see anything worth trading, I will sit back.
I am feeling like that more and more each day. Something about the grain market smells like a bubble. The problem is, no one knows how big the bubble will get before it bursts. The fact that popular media is talking about a bubble, however, is in and of itself a signal that the top, in fact, is not in yet.
I have said before, the top in grains will be when Catie Couric starts having people on giving advice on growing your own corn, wheat and beans, to “beat the middle man”. We simply are not there yet.
And I could be wrong.
But I am cautious here at these levels.
Grains have rallied, inexorably, for the last 7 months. When will the other shoe drop? I personally think sooner rather than later, but I always like to sell new highs.
All I can say is be selective, be disciplined and above all, do not be afraid to admit you are wrong and bail quickly on a position. The first lost is always the cheapest.
The stock market looks like it wants to grind higher, however, we are getting to the point where small investors are talking about getting back into the market again, now that the “storm” seems to have abated. Talk like that makes me wonder if we are not ripe for a frightening correction lower.
And for the past 18 months, i was a bull. Go back and read my blogs.
Have a great weekend. Markets are closed Monday for President’s Day.
CER
