I have been long DJZ here. That is no news. I suggested there might be a 150 pt window of heat. So far, the low in DJZ was 12,937: That’s just 63 points.
The S&P also traded to to key support at the psychologically important 1400 level. Today’s low was 1394.70, and we bounced back to settle at 1407.
Hurricane Sandy is on its way. We will have light volume probably through Wednesday. I’d be looking for a light volume rally. But that’s been my idea for a week here. Lets see if it pans out.
Have your stops in place, in case there’s some surprise, but I certainly like fading all the doom and gloomers panicking about “bad earnings”. Longer term they may be correct. I have no idea, but for now, I want to fade the herd. Stay long, my friends.
As for the Corn and Wheat, we are in no mans land. Volume has dried up. The exchange (CME) looks like the walking dead. I don’t know if they realize that volume has evaporated, people hate the fact that they gave the store away to HFT, who do nothing but screw with a market that for 150 years did a beautiful job bringing hedgers and end users together.
The push for 24 hour trading has been a total bust. No one wants to trade grains 24 hours a day.
Bending over for China, the same way they bent over for Goldman, is just another error in judgement. I know its CEO’ dream to have the black box printing money 24/7. No holiday’s, no health care, no issues.
But if human beings don’t want to play, you have a problem. And right now, that ‘s the issue, in my humble opinion.
And this is more than just a bitter old floor trader longing for “the good old days”. If the computer could replicate the pit, and the way humans trade, it would be a boom for the industry. Trust me.
But computer trading does not mimic human trade. And that’s the problem.
The market has been delivered on a silver platter to the HFT groups. Liquidity has dropped, instead of increasing. In a year of a 100 year drought int grains, the volume did not reflect the opportunity that was available… why???? B/C no one likes the way the market trades anymore. There is no liquidity. Not really. The market is not transparent, either, They traded transparency for invisibility.
At the end of the day, if food prices get out of hand, they will seek out someone to blame it on. If people got pissed about wall street bankers gambling w/ their mortgages and screwing up the country…. just wait til they feel like their price for a loaf of bread or a steak is artificially pumped up b/c of some kid w/ tattoos, saggy pants and dread locks writing computer trading code. That will be a bad PR problem for the exchange if that ever comes home to roost.
Bottom line, liquidity is not there. Not really. Not when you need to move 500 contracts. Its just not.
And the exchange has to do something to address it.
I am confident they will. They can start by going back to the old trading hours.
Reference the article in the Tribune this week and the Suntimes today Friday the 26th.
Have a great weekend.
CER