COFFEE, SUGAR, HOGS

COFFEE, SUGAR, HOGS

July 22, 2019

Hello everyone, sorry for not having an article last week but was stretched for time and could not put one out.I hope that this letter will make up for last weeks absence.

COFFEE: What do we know according to our in house model?We know that September Coffee remains in an uptrend.We know that it will take a Friday close at or below $91.35 to turn bearish.We know that September Coffee rallied to a point where it was above the third stand deviation of the 199 week average. We know Coffee has now corrected itself back to a point of equilibrium with the positive indicator within the first stand deviation of the 204 week average and above the 204 week average.We know the negative indicator is with the first standard deviation and below the 204 week average.It is our opinion that Coffee is now in a ten day period of consolidation bounded by $108/110 on the upside and $105/103 on the downside.We also know that unless September Coffee can move to higher levels it will become more difficult for it remain bullish in the coming several weeks.

What to do?In the near term will continue to look to buy September Coffee between $105 and $103 pick your poison according to your risk taking comfort level.

SUGAR:I really like the short term upside potential of the October Sugar market which given some of the data contained in our in house model is a great inconsistency.So what do we know?We know that Sugar is in a down trend and needs a close at or above $14.37 on Friday to reverse the trend.Our model also tells us that it will be even more difficult for October Sugar to reverse to bullish in the next several weeks to come. The RSI for October Sugar is at 30 as I write this article.As I have said before our in house model does not use the RSI but I refer to it only because it is our opinion that it is generally understood by the trading public.Our in house negative indicator shows October Sugar above the second standard deviation of the 204 week average, and nearing in on positive equivalency. What does positive equivalency mean?It means that the market has become over stretched to the downside to the point where the positive indicator is showing signs of higher prices. Over the last 204 weeks the negative indicator has exceeded the 204 week average only nine times.Only once during that time has the negative indicator exceeded the third standard deviation.We all know that PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, so do with that information what you will.What do I suggest?I am going to recommend counter trend buying October Sugar in the area of $11.53/11.39 pick your poison according to your risk taking comfort level.

HOGS:The hog market has given us a pretty wild ride over the past several weeks to be sure.So what do we know?We know that August Hogs are in a downtrend. We know that it will take a close at or above $93.95 this coming Friday to reverse the trend.We know that the values needed to reverse the trend to bullish will be similar over the next several weeks. We know that five weeks ago our negative indicator had exceeded the second standard deviation of the 199 week average for only the 7thtime.We also know that it entered the area of positive equivalency.What does positive equivalency mean?It means that the market has become over stretched to the downside to the point where the positive indicator is showing signs of higher prices. We all know that PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, so do with that information what you will. From that point it has taken the Hog market five weeks to return to the point of equilibrium with both the negative and positive indicators with the first standard deviation of the 204 week average.It is our opinion that once a market reaches a point of positive equivalency it can and does take three to six weeks to get back in balance.Once the said market is back in balance the question becomes the likelihood that said commodity will return to the underlying trend which in the case of Hogs is bearish.What to do?Given that the market has rallied $10.60 from the bottom and according to our model needs yet another $10.00 to turn bullish it is my opinion that Hogs will revert back to the underlying bearish trend and rallies should be sold.For those that have less aversion look to sell at present levels, for those that are a bit more cautious look to sell $84.75, pick your poison.As usual do not forget to use a stop loss.

My name is Lee Gaus if you have any questions you can reach me at 1-877-304-1369, 312-384-1166, or email me atlee@efggrp.com. If there is a commodity you would like me to address shoot me an email.

There is significant risk involved in trading futures and/or options on futures. Futures and/or options of futures trading may not be suitable for all investors. Investors should consider these risks and evaluate their suitability based on their financial conditions. Past performance is not indicative of future results.