December 15, 2023

 An update heading into 2024

I recently had one client ask me, “Aren’t the markets usually pretty quiet in December…with Christmas and yearend and everything?” My answer was, “There is NO ‘usual’ in this stuff,” and the bottom line is wildass moves can, and do, occur at any time, in any season, in futures…and that IS what we are seeing now. Massive fund money is sloshing all over the place and BIG moves are underway in a number of markets…and as for those areas which have been “quiet?” I firmly believe the odds are high that they are about to join the party, as, I will also note that yearend and the new year often DO represent the BEGINNING of major commodity market moves.

Along the same lines, I just as firmly know/believe that a trading approach which positions money in a handful of markets, all of which individually have truly dynamic potential, simply makes mathematical sense…wherein $1 each in 5 markets CAN easily return $5 if just one of them works…or obviously lose 100% of the entire $5 if all are wrong…but CAN also result in 2 or 3 (or all 5) working, in which case, the result can then be quite big profit multiples. The truth is, I frequently make this point and try to sell this idea, but rarely get any takers, simply because it’s easier to sell people a $1000 per option trade than one calling for $5000…But everything in my experience has taught me that this IS the way the futures markets should be approached; that is, take a series of positions with the big profit potential that is a function of the leverage and volatility that ARE inherent to futures…buy a decent amount of time…and yeah, as I am always saying, THEN JUST LET IT HAPPEN. Leave them all alone…especially when they are working. Of course, there are variations to this approach (for example, adding a little to whatever trades start working) but that is the basic mentality, which once again, just comes down to the math of how options routinely DO expand in BIG percentages when markets are making the 30-40% swings that ARE the norm in futures.

Updating all of my current “portfolio” recommendations…And one new one….

Markets that are moving now…

Still Buying the Stock Market

As I have noted for decades, only a fool would actually use Wall Street’s predictions as a guide towards what to expect from the Stock Market, the evidence of which is clear on the table below…verifying, since 2000, what the brokerage house “strategists” (a joke title to me) have predicted for the S&P 500 duing the next calendar year, and then what the final result actually was.  For sure, there are a FEW years when they came close, but if you go line by line down the last two columns, how stunningly off, or miserably WRONG, these supposed “experts” have been, is almost unbelievable. Truth is, if they are good for anything, it’s to give you an idea of what NOT to expect…SERIOUSLY.

 The 2023 figure, not complete until Dec 31, has been calculated as of today.

And look…As I always point out, ALL of those internet and brokerage house guys are quite articulate, well dressed, and can SOUND so smart, logical and persuasive, but the FACTS are that they are almost perennially WRONG…and repeatedly CYA’ing their bad advice throughout the year with “revised forecasts” and references to “new” or “unexpected factors,” again making them a fairly consistent guide of what NOT to expect…whether its stocks, bonds, or commodities.

 So what’s their guess for stocks as we head into 2024 (after screaming “Recession!” since 2022)?

 Here’s their averaged guess for where the S&P 500 will be a year from now…

I continue to believe the USA and World economies are accelerating sharply away from the Pandemic…that the planet is still in a technological BOOM, that going forward will be benefitting from low energy prices, the lowering of interest rates, full employment coupled with better wages, and rapidly declining inflation, all of which, to me, ONLY ARGUES FOR A SOLIDLY HIGHER STOCK MARKET.

Still Buying Treasury Bonds

Bonds have now moved up 17 points ($17,000 per futures) from their Mid-October low...when NOBODY was bullish and all the talk was still, "How high rates might go?" That sentiment has obviously since changed (very recently) and as the trading mob switches more and more from Short to Long, I continue to think this current move will carry up into the 130's. I am still long and continue to recommend buying this market.

Still Buying the Japanese Yen

As written before, I see this as THE biggest in-the-hole, severely undervalued market on the planet…And as also noted previously, suggest you don’t even begin to ask, “What will make it go up?” Alan Greenspan point blank stated that NOBODY understands what moves the currencies…which actually have more global trade every day than ALL of the other paper markets combined, making this a massive financial “organism,” that, in spite of any talking head pontificating, is beyond actual understanding…With that in mind, I would point out that there are gazillions of positions internationally…NOT just in the futures market…that are connected to the Short side of the Yen…and sooner or later could result in truly MASSIVE buying to exit those positions.

These markets, I think, are

ABOUT TO START BIG MOVES

 And I would remind you that...like the recent lift offs in Stocks, Bonds, and the Yen, there is NEVER any bell that rings to tell you, “Get on this now!”

 Still Shorting Cocoa

Still Buying Cotton

The fact that Cotton has just been sitting here sideways has not changed my mind at all. I continue you to think that, ANY DAY NOW, like Stocks, Bonds or the Yen, we will see a few decent up days and this market will be off and running. I will almost throw up if I hear one more analyst talk about "weak demand," which for me, has FOREVER been the hallmark of commodity market bottoms. In reality, "weak demand" represents the PAST and has nothing to do with the future...I think the economy is beginning to roar...and COTTON WILL BE GOING UP WITH IT.

Still Shorting Soybeans

Still Buying Wheat

New Recommendation – Shorting Cattle (again, and staying short)

Back in September, at what proved to be the very top of the Cattle market, I put out a BIG Short recommendation…then several days later stupidly decided that “the trade looked too easy,” and exited the trade…only to sickeningly watch both Feeders and Live Cattle then go into relative nosedives…all the while hoping for some sort of rally, which haven’t really come, to reinstate my short positions.

HOWEVER, what is now EXTREMELY interesting to me stems from the three charts following…

Start with this…

The point is, regardless of how smart, or stupid, I might be at predicting the markets, after dealing with clients and traders one-on-one for 43 years, one thing I have absolutely 100% come to understand is the typical human behavior of the average speculator…And in that vein, I will say that, regarding Cattle right now, pretty much EVERYBODY who trades, and especially people in the Cattle business, are thinking, “Yes. I should have been short and I missed it. But I sure as hell DON’T want to get short here.”

 And that is exactly what they should be doing here…Getting Short.

Take a look at this…

This calls to mind that one of the most interesting aspects of futures trading is how nothing is ever what it seems to be…How all the “logic” that is spewed by supposed experts and analysts almost inevitably (I mean that) turns out to NOT be right…that, in this case, with the bullish fundamentals “story” that is still out there regarding Cattle, the idea that those two daily charts above are probably only half way to where they’re going would almost be considered an impossibility…BUT THAT IS WHAT I THINK WE ARE LOOKING AT…AND I THEREFORE RECOMMEND GETTING SHORT CATTLE AGAIN…RIGHT HERE RIGHT NOW, INTO THIS MOST RECENT 6-8 CENT RALLY.

Maybe it’s only farmers who will understand this next observation…but you have to KNOW that the last stages of the BLISTERING FEEDER CATTLE RALLY IN SEPTEMBER was attributable to one thing…EVERYBODY in the cattle business was AMPED UP BULLISH, DEAD AT THE TOP, with the storyline that was everywhere, “Cattle numbers are at 50 year lows and Cattle ARE GOING TO BE GOOD FOR THE NEXT TWO YEARS!”…And EVERYBODY was buying Feeders, at ANY price, with both hands…which means ALL OF THOSE STEERS, WHICH ARE ALREADY LOSING BIG MONEY, WILL HAVE TO BE SOLD BETWEEN FEBRUARY AND APRIL…And you’d better believe that has all the makings of a classic Cattle market not-to-believed-low-priced DISASTER IN LIVE CATTLE PRICES...And THE FUTURES MARKET WILL BE REFLECTING IT LONG BEFORE IT BECOMES A REALITY.

KEEPING IT SIMPLE…I RECOMMEND BUYING PUTS IN THE FEBRUARY LIVE CATTLE CONTRACT.

Any time I get involved with the meat markets, I note that they almost routinely make some of the craziest, biggest, non-stop STUPID moves that we ever see in futures…And with the FACT of where prices still are historically…and the FEVERISH buying that took place in September, I do think the odds of having one of those STUPIDLY BIG moves are quite high right now…And yeah…if I do have this right, there IS some BIG leverage in these options...much more even than what I would classify as "normal." It goes without saying that if I am wrong you can lose every dollar your spend.

I think there are some fantastic ideas here…Hope to hear from you. If I don’t, Merry Christmas to all…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: all of them