Holy COW!!!

Farmers are in the commodities business which has not been a great place to be these days.  I want to help you feel a little bit better so here are some charts that might help.  I saved the best charts towards the end.

​DBC is the commodities ETF which you can trade on the stock market.  It mirrors pretty much anything the CRB index does.  Agriculture is part of it, but so is oil, metals, etc.  DBC has broken through its intermediate cycle trend line and will probably begin a new intermediate cycle soon.  Rallies out of intermediate cycle lows tend to be the strongest. 

DBA is the Agricultural ETF which would be the agricultural segment of DBC.  It follows grains livestock, coffee, cocoa, cotton, etc..  DBA has rallied hard these first few days of May and already has reached the 200 day moving average.  This is a significant level as price has tended to reject that level every time over the past 1.5 years only marginally breaking above it a couple times.

JJG is the Agricultural ETF which would be the grains segment of DBA.  It follows corn, soybeans and wheat only.  JJG is also trading up against the 200 day moving average.  Grains have been in such a steep decline over the past 4 years that this average can barely keep up the lower pace with price. 

And then there is COW. COW is the Agricultural ETF which would be the livestock segment of DBA which includes hogs and cattle.  There are a couple things I notice as I look at livestock.   Once the 200 day moving average turns lower or higher, they tend to be much larger trending moves.  Livestock has been in a steep decline now for 2.5 years.  The 200 day moving average turned lower in October 2014 and has been pointed lower ever since.  Notice how the strength in price since the October low has finally turned the 200 day moving average higher?  When the 200 day moving average changes direction, it will likely confirm that a change in trend is happening.  It took 7 months to confirm this change the trend, but I think its safe to put on our bullish hats.

​Today was the best day livestock has had since....well I can't find a day that was this good.   Further more, I cannot find a day when the CCI pushed this far above the 200 level on COW. 

Live Cattle Futures has jumped more than 2% during five of the past six sessions. Going back to 1964, the only other time it did this was on July 1, 1974, after which it gained another 15% over the next month before giving all those gains back.  Notice how the live cattle contract is only 2 points away from filling the gap left from March last year.

The chart below shows that commercial hedgers are holding a record large short positions.  Rallies tend to not be sustainable when the smart money is holding this many shorts.

Its not just cattle which are trending higher.  Hogs are set to run much higher also!

I do believe nearby prices will be very difficult to hold at these levels, but I also feel like the trend has changed.  Once cattle has had an opportunity to "correct" and ease excessively optimistic sentiment, I believe we will see higher prices into the future, not lower prices.