I made a bullish recommendation a couple of weeks ago selling wheat puts which is something you would do at extreme bearishness sentiment. While sentiment is a key component of what I call an actionable place, its not the only component. I also look for assets which are stretched well above or below a moving average, the commodity channel index (CCI) and cycles. Secondary tools are fibonacci's, trend lines, price patterns, etc.
There are a lot of asset groups which are at extremes now, and these will all influence grain prices to one degree or the next. I want to just run through these to see where it is most likely fund managers will be allocating their resources. I am going to start out with a sentiment chart overview. Right out of the gate, you can see that the dollar (upper left) is one of the most overly optimistic assets, and the euro (lower right) is one of the most overly pessimistic assets.
The 3 year cycle low is due next summer. Because the intermediate cycle has stretched 8 weeks beyond normal, I am expecting this to turn any day. When it does, it will help grains tremendously. I am expecting this to turn any day.
This, while sentiment is extremely bullish.
Really? You are in buying stocks here? Fund managers are interested in pouring money into this market now? I am sure big money is well aware that last years yearly cycle low occurred in early February. They happen near the same time every year. All the stock indexes look this way.
I don't believe oil has a lot of energy left (pardon the pun) to push much higher. Prices are stretched above the 200 day moving average, and we are nearing the timing bands for cycle lows to occur.
Those are but a sample of assets which seem overpriced. The following are my favorites to be long in....to own, at least for a couple months.
Pessimism in the bond market has not been this extreme since 2006.
The next two months will probably give us the best shot of locking in some decent prices (I hope), barring some sort of weather issues. One sure way to sell at below average prices is to sell when you are afraid, and when prices are below the green 200 day moving average line. Until we have higher than average grain prices, I won't be recommending to sell any.
On Friday, I am going to push out an "out of the box" recommendation for corn sales based on the premise I have made today.