Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Monday Midday Color

Jason Goepfert
2019-04-08
null

Here's what's piquing my interest so far today.

This Little Piggy Goes To Market

Hog futures have soared. Corn has not. The ratio between the two is now at an extreme.

There are a large number of factors that go into the price gyrations of both markets, but historically there has been a loose relationship between the two. Basically, pigs love corn.

Prior to the increase in specialized farming, diversified farms often viewed hogs as an alternative strategy for marketing corn. If corn prices were low the farmers would “walk the corn off the farm” by feeding hogs. If corn was more expensive or livestock too cheap farmers would sell corn and reduce livestock numbers.

Due to the vagaries of international trade, and secular changes in ag practices, there's no telling if the relationship between the two makes sense any more. Whatever the reason, there has been a general tendency for the prices of hogs to decline, and corn to rise, in the months following an extreme in the ratio between the two.

This is notable now because speculators keep selling corn futures and now hold more than 5% of the open interest net short. That has been a positive for future returns.

That's been the case even over the past few years of a steady downtrend, where every spike in prices has been sold aggressively.

On the downside, corn traditionally peaks right about now, but the seasonal pattern has not held up much at all in 2019, with a highly inverse correlation to its usual path over the past 30 years.

Earnings

U.S. companies will start reporting their Q1 results in earnest this week. A concern is always that investors have already baked in potential better-than-expected results, since stocks are trading at near 100-day highs, even as earnings may take a hit from year-ago levels.

Generally, when the S&P 500 has been hitting 100-day highs in the week leading up to Q1 earnings, it has been good for the first couple weeks of reporting season, but the next two months showed more risk than reward.

Options Traders

There was a modest rebound in speculative activity from options traders last week. The Options Speculation Index rose to 1.2, meaning there were 20% more bullish options strategies than bearish ones. While not a rally-killer by any means, the next-week returns in the S&P 500 were subpar after other similarly high readings.

It's also a little troubling that over the past 5 weeks, the smallest of options traders have spent 38% of their volume on buying speculative call options.

Knee-Jerk Contrarianism

This week's Barron's cover story is generating a lot of heat among bears, hoping that *this time* it's going to nail the top. Some magazine covers are useful for that kind of thing. Barron's is not (see the Saturday blog post for a little more detail).

The chart below shows every egregiously bullish cover story in Barron's since the financial crisis. None of them were contrary indicators.

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.