Why are Grains Markets Watching the Elections?
Nov 08, 2016
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
Leading up to the November US Presidential election one of the main driving factors in grains markets has been money flow, or the movement in or out of marketsby the large speculator (funds). When Clinton has been leading in the polls commodity markets in generalhave been firm and whenever Trump has gained some ground markets have been under pressure. Why is this and what happens after the election?
To understand this we have to understand the logic behind the moves of the large speculator. When they feel comfortable with a situation, or a potential outcome they are more willing to build larger positions. This is what is called "risk on" trading. In this particular case the funds look at Clinton as being asafe, "more of the same" option. The fact is that stock markets and some other indicators have done very well under Obama's watch. (We can argue the actual health of the economy another time)
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On the other hand, when the large speculators are not comfortable and see uncertainty they tend to pull back from what they consider riskier investments. This is called "risk off". Leading up to the election we have seen "risk off" trade any time Trump has gained in the polls. This does not necessarily mean that they think Trump will be bad for the economy or bad for markets (although some likelydo), it does mean that Trump is different than what we have now and therefore creates uncertainty. Adding to this uncertainty is how foreign countries and markets would react to a Trump victory.
So what happens after the elections? Well, as said before if Clinton wins there will likely be much of the same policies in place as there was during President Obama's two terms. Markets may see this as a relief and find support and the uncertainty falls away from the market for now. If Trump were to win things get a little more difficult to predict. Initially markets may take this news poorly as speculators move away from risk, but as we just saw with the UK's Brexit it may only be a knee-jerk reaction.
In the mid-term there are question marks about what plans Trumphas for foreign policy. He has said that he wants to rip up trade agreements and start over, if and how he would do this is a question. This has been argues as a reason for strong corn and soybean exports as global endusers may be concerned. But, Trump has a reputation as a savvy businessman and a top negotiator. Trump supporters thinkthis could ultimately lead to better trade agreements for the US and that in the long term the Economy is in better hands with Trump.
This election may be the most interesting one we have seen in the US for a long, long time. The results could have an impact on markets both sort and long term. The grain markets are certainly paying attention.
We have some complimentary 2016 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. (Shipping to the US only)You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.Follow me on twitter @thetedspread if you like.
DecemberCorn Daily chart:
JanuarySoybeans Daily chart:
Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or email@example.com
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.