The Things We Trade

I last posted January 22.  Things in the market really have not changed since then, except for the stock market of course.  The nature of the market changed the night Qasem Soleimani was blown to smithereens, and ever since the market has been processing what coronavirus means.  What has surprised me more than anything is that every trader in this small group of traders I manage has stuck with it.  Nobody has quit.  This difficult period will pass.....hopefully soon and our patience will eventually be rewarded.

So the tools I have used don't work in this environment.  In the mean time, it is best that we keep our leverage down and wait.  As we wait, we should keep our eyes focused on the big picture.  What follows is a series of weekly charts I look at beginning with the stock market.  Here is what the S&P 500 weekly chart looks like.  A 10% correction only brings price down to the 3000 area.  This would also be near where the 200 day moving average is today.  A true regression to the mean event would bring the price back down to the 200 week moving average near 2700.

Crude oil and energy in general is one of the most oversold assets out there.  Ordinarily this would be a slam dunk to buy at this level as normal seasonal activity would necessitate high energy use, but with the coronavirus over our head we could still see lower energy consumption.  I read yesterday that Chinese energy demand could drop 20% due to closed manufacturing facilities.  I own oil here myself, but stops need to be maintained at 49.50.  A move lower could take oil back down to $42.36.

Ordinarily we would also be shorting bonds now.  For a short bond trade to work, we need the stock market to continue higher.  If stocks do drop we would probably see treasuries soar.

I think we should take a moment to look at some Ags.  There will not be a corn chart because it is directionless at the moment.  Starting with soybeans, my wife noticed are near the bottom side of the channel.  

Seasonally speaking, we would normally be shorting wheat.  I am a bit surprised wheat has held up this well given how weak corn and beans seem to be.

Hogs look interesting here to buy.  There is still a lot of Chinese risk in the market however.

Feeder cattle are getting close to a buy.  Live cattle are a bit further away though.

I bought some coffee this morning.

I have not shorted Sugar yet but it looks sweet here.

Cocoa also looks toppy here.

Are you looking for metals charts?  I am not posting any metals right now as the weekly charts really do not reveal much.  I think gold is trading into a triangle formation which is a continuation pattern.  Once this difficult consolidation is through we will get another strong trending move.  This will probably happen in conjunction with a scary drop in the stock market.