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MYERS ON FUTURES
Prepared by Steven R. Myers
Six Month Campaign Trade Update
Beans, Meal, Bean Oil...Bulls!
The old crop-new crop bull spread has moved from the 10-cent area to the 40-cent area. A $1,500 move may have doubled your money, but this is just a start for a spread that moved $10,000 in early 1997. It has moved twice that in some years. Bull spreads generally go higher and higher for six months or more just like a typical bull move in an outright futures position. I have started this bullish campaign on the bull spread to see how many people I can get in on this spread. This is not for the nervous day trader types who trade mainly for action. I am looking for the longer-term trader who is serious about doing this the right way for a shot at making some serious money. That is not the main reason most people trade! This is best for the person who has between $5,000 and $25,000 who can sit on a position for many months as long as the position is moving the right way. This is not for people who have to make money by Christmas. You are very likely to lose money if you trade on a shoestring or try too hard to quickly double your money. Many people will start out with this trade, but few will stay with it even if it is a good trender. Few people have the patience to even stay with a trade that is consistently making them money. You will never make a $10,000 profit if you always get out as soon as you have $100 or even $1,000. Don't get nervous! Play this with a deadly serious business type method. You have to have a plan and stick to it!
The plan that will work is about the same as it should be with about all of your positions. I prefer a combination of a price and a time stop. You force a market to make you money or you are out! You do this by gradually moving your stop for you a certain amount every couple of days whether the market has moved or not! The market will have to have some momentum for you to stay with it! This is a very good money management defense strategy. Your first goal is to not lose money! Your next goal is to stay with a trend and let it run as long as it is going your way. This method will keep you in the strongest markets and out of the weakening markets! This trailing stop method works best in the futures. A similar, but revised plan can be used when you are using options, spreads, or pyramid adding in the futures.
Recent Observations–Bean oil rates as one of the most bullish grains. It was up today when most of the grains were down. It is not yet the biggest mover on the up days, but it is bullishly firm on the down days. Long bean oil as well as the previously mentioned bean meal against one of the weaker grains with a short looks like a wise move. Wheat and oats are a bit weaker than corn.
Bean Update Number 1
Bean Spread Potential...The Moon!
The bean market looks strong and could go to the moon if the El Nino kicks in on top of this record demand factor. We need a large crop from Brazil to catch up with demand. They had a good crop, but demand outstripped it and they are having to import beans from us the next few months for their own demand until their next crop of beans is harvested in the spring. The demand from abroad is going at a record usage pace for our crop. There is a large crop of excess corn and feed wheat that will need some protein mixed in to make it into feed for the world's growing chicken consumption. The trend of corn and wheat is negative at the moment. This means that short corn and wheat may still be a nice hedge against long positions in the bean complex. The bean oil also has a growing demand base.
Mid-America Potential
The margin is low for the bean spreads on the MidAm. I am lowering my commission on the MidAm grain spreads to promote this opportunity. The margin is currently as low as $100 for each MidAam bean spread. This may make it advisable for the traders who would otherwise use the CBT beans to consider the MidAm beans. The old crop-new crop margin for the CBT beans is $1,500. This may allow for some leeway as you scale-up add to this market as it goes for you. A dollar move on the spread for 5 MidAm bean spreads is $5,000 just like a buck move on the CBT. This is not a trade to do for excitement. This is a trade to do as a serious money making business potential. Daytraders usually lose money, but they are really only trading for the excitement anyway. Decide what you are trading for! A market does not go up $5,000 overnight. It takes some patience and time for a market to make a big move, but big moves are possible! There appears to be a dip just ahead which will provide an opportunity in this spread.
Bean Update Number 2
The bean spread is starting to give us some major signals of strength. It is doing something that is usually a very reliable advance indicator of coming strength. This important signal that you should always watch for is when the bull spread starts working in a market even during a down day! It is normal for a bull spread to work “widen” in a bull market. All uptrends are suspect if this is not happening! You will see the best moves after you have gained enough momentum in the spread to have changed the market to an inverted market. This is a sign that the demand has driven the spot cash above the futures market. This has happened in meal even during the harvest period. That is a rare thing! A diversion from the norm! Any divergence is something to take note of.
Another 6 Month Campaign Trade
Yes...Yes...Japanese Yen Is Still Under Attack–The more the yen goes down the more this downtrend is confirmed! It has broken out into new lows and may really collapse. The Japanese interest rates have really dropped, but it has not helped their stock market. The next thing to go down is their currency. The world currencies and interest rates kind of do whatever they need to do to equalize the world situation. The yen needs to go down a lot for the Japanese to be competitive enough to keep jobs in their country. We truly do have worldwide competition and one cannot get too far out of line for very long. The highest in the world will equalize slowly toward the lowest in the world. This is true of the interest rates, currencies, hourly wages, and more.
Going with a trend is really all you need to do. Hopefully the trend with the best momentum. It does not matter whether that trend is up or down. Then you have to use some money management. You have to trail a stop so that you are out of the bad ones quick enough that you will still be around when the really good one comes along. Short the yen may just be one of the really good ones that trends long and far.
Yen Update Number 1
Yes...Yes...The yen has been quite a bear market recently and there should still be a lot to come. Japan is the most recent Asian country with a crashing currency. All of those currencies are racing down to see which one will have the most competitive rate for exports. No one can know all of the reasons. Not all of the demad factors as well as the supply factors in any commodity! They both constantly change. All markets are only price lines moving across a page! You simply have to get in with the trend in the ones with the strongest trends! The market is the one that knows the supply as well as the demand and it shows it to you!
Yen Update Number 2
A market that is doing a runaway in your favor can be a nice problem to have! You have to stick with the big movers to make the big money. There is a couple ways to do this. The simplest way is to trail your stop behind the market. The corrections will also get larger when a market is making huge moves. You may want to bring your trailing stop down pretty close when you see a market stall out after making a quick move of several thousand dollars in your favor. On the other hand, you should also be pyramid adding to a big moving market that you feel may still move $10,000 per contract. Adding to your winners is way that sometimes makes it possible to start with a loss potential on just a couple contracts, but end up with profits on many contracts. Risk “their money” after a market proves you right by a nice margin! The yen move is certainly qualifying in these areas!
November 14, 1997Steven R. Myers
Myers On Futures Co.
P.O. Box 777, Summerfield, Florida
Financial Commentary | Consensus National Futures and Financial On Line Index
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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