Here we go again, with the Dow making a fresh run above the 12250 level in the cash. 12,500 should be resistance. However in the broader S&P 500, we have a ways to go to challenge 1292 which was the October 4 month high. Currently trading at 1265, we have 30 handles to go to challenge that level.
I think we just might challenge that old high in the S&P by the end of January. This week of trade will be suspect. IN fact, I recommend not trading this week due to the thin markets. If I had to trade, I’d be on the bull side, however.
In the grains, as usual, I was about 2 or 3 weeks early on the buy rec. Some things never change. I typically am a little early on ideas. Fortunately, last Friday I finally pulled the trigger and instead of being long futures, I bought call spreads. Those so far have just about doubled. That’s a good way to end the year. Hopefully, I will be able to pull out the initial cost of the trade and then just have a free bee on in front of the Jan 12th USDA. That number, quite frankly, could go any way. For now I like the bullish side though..
1) funds are short beans and wheat 2) we’ve just moved off 14 month lows in beans, 16 month lows in wheat and 9 month lows in corn. 3) non professional retail small traders sold those contracts at the recent lows. Given that dynamic, I see no reason to be any way other than long grains now.
Finally, I am always a contrarian, if nothing else. This morning Business section in the Tribune was a bearish outlook for 2012. On that story alone, I want to be a buyer of US stock indexes and US stocks. In 23 years of trading, I have never seen a prominent news story that I did not want to fade. At least initially. Time and time again I walked into pit with a bullish article on grains in the Tribune or WSJ, and that day we were 20 to 30 cents lower. Something about print articles in particular, makes this relationship hold true. The paper’s bullish? Sell it. Right now the paper is bearish? I’d want to buy dips. This article reflects the continued bearish sentiment amongst money managers and retail investors. This has to be a buy signal. Fade the herd.
CER