2019 Commentary

Greetings: MONDAY 19 August 2019

GTC order filled:  Closing purchase: I bought back the short OCT19 Crude Oil 75-strike CALL for 0.01 ($10.)    It was originally sold for 0.05 as one leg of a short strangle, so the profit per option is 0.04 or +$40.

My only open position as of today is the short DEC19 430-strike Corn CALLs, see:

Now, I am completely out of both Crude Oil and Gold positions.  The volatility lately, not just in stocks but also due to trade talks, in most commodities – seems to hinge by the hour on the content of Presidential Tweets and/or a Chinese newspaper headline.  The rapid and unexpected trading after these events – and how quickly they turn the markets is almost unprecedented.  One of the most respected and major analysts posted Friday and  phrased the current markets as, “a pause in negativity.”  I am not criticizing this analyst as much as empathizing with him. 

There is a basket of opposing news in Crude oil:  On the one hand supplies are high – and on the other hand there are unexpected cutbacks in production from Europe and the Mideast.  There is still money pouring into gold ETF’s and this chart (see below) illustrates a move of over $130 in just a month.

I will wait to see the markets open today (Monday) and then shop for strikes in both oil and gold that seem very far from what the extremes might be over the next two to four months out.

Corn:  Crop conditions have been reported better than expected and China-talks got tougher on the prospects of them buying ag products from the USA. Then in one day-  on Friday, the grains and stock market moved up, seemingly due to the media inferring from a Chinese headline and more White House phone calls – that progress in the trade talks might happen in September.  Over the last year, how many times have we heard and seen these false-starts?  Almost too many to count.  Such fluctuations due to headlines have been swamping any reliable fundamentals of many of these markets.  The new crop (2019-2020) harvest begins in about a month.  Historically, prices drop as the harvest progresses – once the harvest is in full progress the crop is not as much “at risk” as grains go into the bins.  With the last USDA WASDE report projecting ending stocks of around 2.2 billion bushels, it will take HUGE reductions in yield to support any bullish view for corn prices while the harvest is in progress.  Additionally, the World (not the “USA”) stocks-to-use is expected and does, indicate no shortage of corn at all.  Even selling strikes at 430 and above basis the DEC19 corn futures, the question becomes will the news between China/USA temporarily swamp the fundamentals and make it difficult to hold short CALL positions.  These two charts are free to the public and available directly from the CME at their WEBSITE : https://www.cmegroup.com/trading/agricultural/corn-reports.html

These are the Stocks versus STU for corn based on the latest USDA info.  You can see (World) there is no shortage of corn.

As you have probably noticed, I put up this TRADE COMMENTARY POST for Monday’s – a bit early – usually on Sunday afternoon.  The news cycles has been so fast the past few weeks, that things can change very quickly.  For that reason, I am going to start posting the TRADE COMMENTARY on TUESDAYS instead of MONDAYS for a while starting next week on 28 August 2019 – TUESDAY.  

I may add comments for this week again here on this website in only a day or two.  I will send out an email notice when I made a new post or any trade activity, per usual.  This will be an interesting week for sure.

During times like this, the markets seemingly do what they will, regardless of history, fundamentals, and other factors.  As traders, facing such artificial and fickle market moves – is what we have to deal with.  

I hope to have more comments here in a day or two.  Have a great week. – Don

Don A. Singletary

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