Prepared by Pacific Commodity Letter
SOYBEAN MEAL/SOYBEAN OIL
(May 14, 2000) Soymeal/soybean oil spread prices continue to gain as edible oil prices in the Americas fall. Meal did not gain as much this week as soybean oil fell, but that is the beauty of a spread. Both sides can move in a profitable direction at the same time...this week, both sides of the spread were profitable.
Beneficial rains in the Plains states and in South America were ignored in favor of soil moisture concerns and yield problems projected for the summer. From Monday's open to Friday's close July meal rose by $3.20 or $320 per contract, while July beanoil dropped more than $400. While RSI is high for the meal (over 72% in the 9-day formula) stochastics are bullish and only slightly overbought. Moving averages are positive with wide divergence. Other indicators, e.g., direction and momentum are strongly positive for the meal.
EURO FX/SWISS FRANC SPREAD
FINEX had fallen severely since the third week of March. It rarely moves more than 100 points. For many months since last Fall it was a slowly rising spread. Friday it exploded upward more than 300 points in the June contract, violating the trend channel lines, and shooting past all three moving average lines. Stochastics had already been bullish, but it is unreasonable to think that anyone would have taken that signal in a long, declining market. All indicators have turned bullish in a trice, and so are untrustworthy. Where this spread will go from here is anyone's guess. What the fundamentals are behind this huge move upward is also hidden from public view. It is worth looking at the chart for amusement purposes.
TREASURY BONDS/EURODOLLARS (TED SPREAD)
The TED is in the third week of an uptrend, moving back and forth within its trading channel.
JULY SUGAR/OCTOBER SUGAR
July versus October sugar has leveled off and cycling with a channel
10 cents wide. I'd have to call the present trend neutral, after a very
nice "run" higher. Stochastics are "crossed" in a buy signal and the spread
met the upper trendline and is retreating slightly. The momentum is probably
negative, but there is no substitute for the data--like charting the spread
differential oneself.