July 12, 2013 - Issue #693

In This Issue

1. Trading Futures Spreads
2. Lean Hogs - Further downside potential?
3. Economic Calendar

1. Trading Futures Spreads

"A basic and important strategy for commodities futures traders.

By: Mark O'Brien, Cannon Trading Commodities Broker

Over my 20+ year career as a commodities broker, I have studied and traded a wide range of approaches to trading the futures markets.  From candlestick formations to the commodity channel index, from condors to turtle trading, there’s an enormous catalog of tools and methods available for traders to consider.

One method I have noticed is surprisingly underrepresented among retail traders is futures spread trading, where a single position in the market consists of the simultaneous purchase of one futures contract and sale of a related futures contract as a unit.  I call it surprising because some of the most invested players in futures trading – and arguably the most sophisticated – include large speculators and commercial firms who regularly employ spreads.  This includes traders in the markets who often actually buy and sell the physical commodities we trade.  Farmers, ranchers and other food growers along with food producers, petroleum companies who either drill for oil or natural gas or refine these products – or both, financial institutions with enormous holdings in treasuries, equities or currencies, mining interests and their buyers – all these areas of production and distribution employ spreads from time to time as an important aspect of their businesses.  Indeed, spread trading is a fundamental and essential part of the commodities futures markets...Read Full Article.

2. Lean Hogs - Further downside potential?

Chart analysis by Ilan Levy-Mayer, VP of Cannon Trading.

click on image below to enlarge

Lean Hogs have had an amazing upside run as one can see from the daily chart below. The market traded from around the 88-cent level to nearly the $1.00 mark between May 17th and June 27th.

On June 26th, right before the market made its recent highs, I received a technical sell signal, based on my personal technical indicator preferences.  So far the sell is working well as the market is picking up steam, slowly, slowly to the downside.

A Bloomberg item from yesterday, July 11, showed pork production in the three months ending in September will increase 3.1 percent from the previous quarter, as stated by the U.S. Department of Agriculture in a report.  Output will reach 24.14 billion pounds (10.95 million metric tons) next year, which is 0.5 percent higher than forecast in June because of more pigs per litter, the USDA also said.  Wholesale pork fell 2.4 percent to $1.0236 yesterday, the lowest since June 13, government data showed.

I think price action over the next couple of days will determine if this market is heading back to the next major support at 92.31 which is its 61.8% Fibonacci retracement level.  But, if prices can close above 95.22, it may confirm this recent price decline was instead a 4th wave pull back.  If so, the market may make another attempt to trade up to new highs.

Time and price action will tell!

If you are interested to get a second opinion on ANY futures market OR maybe would like to learn how to add options and futures spreads to your trading strategy. Perhaps you simply like to bounce ideas and talk trading with an experienced commodity broker? If so  please feel free to share with us basic information below and a licensed broker will be able to assist you.

3. Economic Calendar

Source: Forex Factory

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.