10-15-2010 09:51 AM - edited 10-15-2010 09:53 AM
In his column today, Roy Smith says he's watching the “dead cat bounce” for clues to cash sales. Says the bounce began on October 5.
"That means that the strength should continue until at least October 19 to complete ten trading days over the harvest low. The price has already exceeded the normal dollar a bushel over the harvest low."
Do you sell at current prices or wait to see if there's a 2008 type of rally?
10-15-2010 03:59 PM
Roy is one smart marketer. There are not too many to yet make their first cash sale of the year. I guess that gives him the support on the dead cat bounce theory. There had to have been other sell signals in the last year which would have prompted sell signals. Now for the week the market gapped up on Monday, made new lows, made new highs for the week on Friday and closed higher for the week. Now I really don't see a dead cat. I think the action this week should be viewed as bullish. Fundamentally with the bigger yields of this year one has to ask if this run up is justified. As a farmer if one has made no cash sales I would use the saying "reward the market" and make a sale here. I still think this was a Bullish week and the cat has been chased out.
"Do you sell at current prices or wait to see if there's a 2008 type of rally?" you ask. Only you can make that decision and that should be made according to the sales you have made and the risk you can afford to take. I am the not suscribing to the dead cat bounce theory but I am looking to sell remaining beans not looking to make a first sale. What about all the Bullish fundamentals in the market? They may change and therefore his dead cat bounce theory may work. What was the thinking before the report came out? I realize that we are in the upper 10% of the prices ever paid for Beans but with the money chasing the commodities it's hard to not want to chase to. The market is like a cat (China) scrambling to get all the mice (Bu) it can to satisfy it's appetite.
10-15-2010 07:51 PM
i have alot respect for roy but there has been a contraseasonal move since the end of june and it continues thru the teeth of harvest. usually those moves tend to extend farther than any one thinks. just mho.d7
10-16-2010 01:54 AM
I don't think seasonals or technical patterns are the way to go here - medium to long range. If one is looking to follow a preestablished plan, then I think Roy's advice is probably as good as any to look for the trigger point for a sale that needs to be made - for the plan or for needed cash flow.
I think the ball to keep your eye on is the projected carry out. If the final numbers for corn and beans are not known, I think the trend is in for N America. Brazil and Argentina need an excellent bean crop. If S America falters then major market moves are in order. The prize is between tight inventories in N America and what occurs in S America. Technical patterns mean nothing except in the short run as long as there is a question about S American production.
10-16-2010 06:25 AM
I have a lot of respect for Roy and his methods.
The narrowing of basis after harvest lows is a key component of the dead cat bounce. With many areas enjoying exceptional bean crops, a lot of beans have been placed in space normally used for corn. I don't know if that means corn goes on the ground, or beans get brought back out of that space relatively quickly---the speed of corn harvest may be a factor in that decision, too.
In either case, it appears bean basis west of the Mississippi may take a bit longer to recover this fall due to the combination of factors above---the only caveat to that is another leg higher in futures which just keeps flat price moving higher regardless of basis improvement....
Given the unusual circumstances, I sure wouldn't fault anyone for hedging $12 soybeans and taking the next 25-30 cents in basis appreciation by December 1....
I heard one of the Des Moines bean processors was full by early Friday morning and only unloading what they could crush...so that would be 6-8 trucks per hour.....
10-16-2010 12:38 PM
Do you read Bill Gary? What did you think of his last?
He is really the only technically oriented guy I get any information about that gets my attention, mainly because he does a good job of looking at historical context and trends. There are certain areas where he gets over his head (i.e. doesn't have a clue how Indian politics and policies work which determine if a surplus can be exported) but otherwise has a certain consistency that is hard to ignore.
I think we may again enter the extremes of supply and demand on a global basis whose outcome won't really be known until next summer. I'm not worried about wheat so much as corn and beans. May become the most interesting market year since 07-08, which was too interesting. Hopefully our recent experience will help us as we negotiate this year.