Wow, what a week!
Feb 20, 2009
The Dow has now taken out last fall's lows. Consumers are losing confidence in the banks and stocks! Concern is now growing that investors are going to pull their money out in mass which could really temporarily crash the market. Early next week will be a very nervous and revealing week. Talk of 6,500 to 6,000 is now being seen. Blue chip stocks are now seeing lows not seen since the early 90’s. Panic is in the air, which means opportunities are getting ripe for the investor.
The gold market broke through $1,000 but could not hold and everyone seems to want to buy breaks. Normally, I get worried when this happens but I have to say $1200 to $1500 gold seems a solid upside risk. This week I bought June gold around $980 level and sold June $1,200 call for $30 or $3,000 premium. If you are interested an inflation hedge, I believe gold is the commodity to buy on corrections. I however strongly urge you to have some measure of protection. These markets are getting violent!
The oil market after yesterday’s bounce up corrected. Everybody wants to be a buyer because of a drawdown in inventory but equally everyone is worried about the future demand outlook. I view it as a long term buy, but it may take to summer to get a solid confirmation of a bottom. Again, buy futures with tight stops and then sell out of money calls to help insulate position is a solid risk way to move at this time.
All of this volatility in the outside markets weighed heavily on corn and beans early in the session today even with the strong export numbers we saw this week. At one time we had beans down over 26 cents and corn down around 11.5 cents. Corn was the commodity that started coming back and eventually closing only down 1.5 cents.
It appears corn is finding value in the lead month around $3.50 level. The basis for old crop corn is going premium in many areas because of very slow farmer movement. We strongly urge all clients with old crop corn and beans to be sold to be taking advantage of these very tight basis levels to lock it up for spring sales. We are becoming increasingly concerned that there is much more old corn and beans that must be priced than is healthy for the market. It appears a lot of producers are holding inventory and holding for a bounce to help pay the bills.
Looking to next week I will be looking to be a buyer of corn early week in the December corn below $3.85 to $3.75 range. If you have sold futures I would focus on trying to sell the out of money December puts. We will be talking about this strategy in our online Utterback marketing service.
Finally, I will be at the commodity classic next week. I will be at the farm journal booth and taping Ag. Day. If you are coming down, I hope to see you there.
If you want to go over details or would like to read more daily recommendations regarding reownership or marketing strategies, email me at firstname.lastname@example.org or email@example.com.
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