Finally we finished the two midterms and the midterm case…woohoo…^0^…feel a little bit relaxed right now although we still have the coming presentation on Monday…aii…

Actually I really want to use the price spread to do analysis this week. However, I am still not sure how to find out the transportation costs…so I decided to use MACD and SMA to estimate the price this week…

Oct 26, 2011

According the MACD and simple moving average, the price of corn is in a bullish mode since the fast moving average across the slow moving average from the below and never across to the slow moving average again from Oct 11. Also, according to RSI, the volume is in the middle of 20 and 80, which means the market was neither overbought or oversold, so I decided to take long position on corn since although it fluctuated day to day last week, it is still in the bullish mode. I still use a similar strategy from last week to estimate the price. Since I am going to take a long position, and the prices appear to increase for one day and decrease in the following day, so I used the price from yesterday to add the largest change in low price from the last few days to bid. The largest change in low price was 0.6 cents, so I bade a little bit higher in order to enter the market, which means I chose to add 1 cent from the lowest price yesterday to bid.

I did not bid for soybean since the price of soybean was more fluctuated than I can expect.

Corn (1 long contract): (-1)*(648-637.2)*50=-540

Soybean (did not bid)

Wheat (did not bid)

Margin Balance: -11230-540=-11770

For Oct 27 and Oct 28, I did not make any decision for neither soybean nor wheat since I felt a little bit risky to take any position right now since I was really confused by the price trends. However, I still kept my long contract of corn since although I know it was a little bit fluctuated for the last few days, the price was still in a bullish mode, and the RSI was still in the middle of 20 and 80, so I decided to hold it even though I realized that I will lose a little bit of money by the fluctuation.

In this week, I was a little bit conservative about bidding since I kept losing much for the last few weeks, and the price trend was not too clear this week. I think we could earn a little bit if we bade more aggressive to make small amount of money by taking positions of corn since it seems like the price follows “up today and down tomorrow” for these two weeks, and nothing big happen to make the price slump or rally heavily.

Oct 27, 2011

Corn (did not bid): (-1)*(637.2-651.4)*50=710

Soybean (did not bid)

Wheat (did not bid)

Margin balance: -11770+710=-11060

Oct 28, 2011

Corn (did not bid): (-1)*(651.4-655)*50=180

Soybean (did not bid)

Wheat (did not bid)

Margin balance: -11060+180=-10880

Although last week had the long weekend, I did not actually feel it was a long weekend since the assignments made me feel frustrated. Until today, although I just handed in Rick’s assignment, I did not feel relaxed at all since there will be more stuff coming up this weekend…>”<…

Actually I feel pretty good to write blogs every week if it is not that busy since I can always summarize what I have learned from the week. I did not know from when, I started thinking that I should not waste of my life of doing something nonsense. I should at least learn a little bit from the things that I have done. So when I feel frustrated, I usually think what it has brought to me. It does not have to be substantial, but at least, it could make myself feel better. However, for this week, I almost forgot what I want from my life. I was too focusing on the stuffs that I learned from classes…maybe I was just feeling too busy…

Oct 11, 2011

Since I was busy doing my assignment today, I did not have time to read any news. And today I suffered a disaster of my margin balance again…However, I still want to review the news and do a little bit analysis although I did not bid or offset:

Complicated relationship between Ethanol and Corn production:

On Oct 10, 2011, after the German Chancellor and French president announced that they would deliver a plan to settle the Greek debt crisis, the price of Ethanol and Corn increase, which the price of Ethanol increases 9.5 cents, and the price of Corn increases 5 cents. When the price of Ethanol increases, suppliers would like to produce more Ethanol since they would like to sell them at a higher price. Since it requires Corn to produce Ethanol, the demand of corn will increase which causes the price of corn to increase. This is a positive relationship between the price of ethanol and corn. However, I just read a news today which indicated that the price relationship between corn and ethanol should be more complicated that we think. Since if the price of Ethanol increases, the supply of Ethanol will increase too, so it will probably drive the price down again.

I did a little bit analysis about this since I did not focus any news about ethanol before, and I did not realize that the price of ethanol could have effects on the prices of corn. So I think I should start focusing on the demand side and supply side of corn to figure out more. Also, since Economists are still doing research about the complicated price relationship between ethanol and corn, the relationship might be complicated than we think, so we should pay attention to it and cannot overvalue the effects of ethanol on corn.

Reference: http://www.good.is/post/chart-the-complicated-relationship-between-ethanol-and-corn-production/

Corn (did not bid): (1)*(600-645)*50=-2250

Soybean (did not bid): (1)*(1158.2-1235.4)*50=-3860

Wheat (did not bid): (1)*(607.4-660.6)*50=-2660

Margin Balance: 140-2250-3860-2660=-8630

Oct 12, 2011

Since the price from yesterday increases sharply, I felt that it may be a good time to take long contracts due to yesterday’s news (since we can only depend on the news from Oct 11 to make decisions of Oct 12), so I decided to offset my contracts and take 1 long position for each of the three commodities since the traders seem to start take long position in such a low price in the market due to yesterday’s situation…

However, I forgot to consider that the amended USDA report was going to come out today…I knew that there will be big effects on prices, and the news from last week indicated that the amount of harvest of corn, soybean and wheat are underestimated on the last USDA report. Since the harvest is underestimated, the supply of corn, soybean and wheat should increase and indicated in the new USDA report, so the price of these three products should decrease. As a result, the prices of these three products turn out to decrease today. Since the price surged yesterday, it covers the slump of the price of overharvest, so the price did not decrease that much today.

Corn (2 long contracts: 1 long contract, offset; 1 more long contract)

(-1)*(645-645)*50=0

(-1)*(645-640.6)*50=-220

Soybean (2 long contracts: 1 long contract, offset; 1 more long contract)

(-1)*(1235.4-1235.4)*50=0

(-1)*(1235.4-1239.4)*50=200

Wheat (2 long contracts: 1 long contract, offset; 1 more long contract)

(-1)*(660.6-660.6)*50=0

(-1)*(660.6-626.6)*50=-1700

Margin Balance: -8630-220+200-1700=-10350

Oct 13, 2011

The prices of Corn, Soybean and Wheat became a little bit fluctuated again, although holding long contracts are at risk for me since Greek debt crisis would not be settle down for a while, I decided not to bid since small factors might affect the price sometimes and may earn a little bit from it. Since I have lost large amount of money, how about try a little bit more…although I know that sometimes I will be wrong…

Corn (did not bid): (-1)*(640.6-638.2)*50=-120

Soybean (did not bid): (-1)*(1239.4-1257)*50=880

Wheat (did not bid): (-1)*(626.6-618)*50=-430

Margin Balance: -10350-120+880-430=-10020

Oct 14, 2011

Since next week we have two midterm exams coming up and may not have time to read news or bid, and I am afraid that next week the price will fluctuate frequently, I decided to offset all of my long contracts of corn, soybean and wheat.

Before I usually use the same price as the closing price from yesterday to offset, just want to be more safe and do not want to lose more money. But now I want to try a little bit more risk. Since I am offsetting long contracts by taking short contracts, I am choosing to bid at the price lower than yesterday’s closing price and higher than the estimated low price today. Actually it is really hard to determine the estimated low price, so I just compared the price changes of low prices of yesterday and the day before yesterday, and then add this change to the low price of yesterday. After adding this change, the estimated low price cannot higher than the closing price from yesterday. This will be a little bit risky since I might not be able to sell them out tomorrow, but it is worth trying since I may be able to earn a little bit money from this.

Corn (1 short contract, offset): (1)*(624-638.2)*50=-710

Soybean (1 short contract, offset): (1)*(1247-1257)*50=-500

Wheat (1 short contract, offset): (1)*(618-618)*50=0

Margin Balance: -10020-710-500=-11230

From this calculation, I found that I did a wrong strategy last night. Actually I should choose a price higher than yesterday’s closing price and lower than today’s highest price!!!Make a stupid mistake…>”<…LOL…aii…complicated feelings…but at least, finally I learned about how to estimate the price, and hopefully I will not make the same mistake again^0^…

When I come back to my blog the week after, I want to take a look at the price spread between Dec and Mar’s futures prices to see whether we can use the stuff that we learn from class to analyze…

Now, I think we should start focusing on the two midterms for the next week.

Good luck for all of you guys!~

First of all, I want to say thank you very much for my classmates who commented on my blog last week!:) The comments really inspired me for further developing my interests of analysis although my profits turn out to be negative this week (aii…>”<)~ I think I am very sure what I want to learn from this course now.

Also, from the experience on last Friday and Oct 6, I think reading news could not really help us to estimate the price. It could only help us to develop our sense of how the factors may affect prices and enhance our skills of analysis. So guys, if you are still upset by the negative or closed to negative profits, let us forget about the profits and focus on developing our skills to an expert of analysis. It could have more fun by doing it!!!

 Oct 3, 2011

Since there are limited news provided online during the weekend, it is hard to estimate whether the price will trend up or down tomorrow. Although I lost large amount of money at the end of the last week, I still want to get more information before offsetting my contracts, so I did not bid today.

Corn (did not bid): (-1)*(592.4-592.4)*50=0

Soybean (did not bid): (-2)*(1179-1177.4)*50=-160

Wheat (did not bid): (-3)*(609.2-619.4)*50=1530

Margin Balance: 3650-160+1530=5020

 Oct 4, 2011

-Brazil increases its inflation: increases its commodity prices. As the second last export country of soybean, people will import less from Brazil and will import from U.S instead since the price in the U.S now are relatively lower. People imports more from the U.S, so the domestic supply of soybean in the U.S decreases. Price of soybean in U.S goes up.

-India promises to buy wheat from farmers in a raising price of 15% (India is the second largest exporter of wheat): the farmers will be attracted by India’s wheat price, so that the farmers in the U.S will start selling to the India. The supply of wheat in the U.S will decrease domestically, the price of wheat in the U.S will increase.

I actually wanted to try one more time to use my analysis to estimate the price trend tomorrow. If it does not work, I will continue to do the analysis each day about the news since analysis is more than anything that I want to learn from this course. However, for bidding, I think looking at the price trend in the cmegroup.com and Daily commodity futures price charts could estimate more correctly about the price trends.

Corn (1 short contract, offset): (1)*(592.4-592.4)*50=0

Soybean (did not bid): (-2)*(1177.4-1160)*50=-1740

Wheat (did not bid): (-3)*(619.4-604)*50=-2310

Margin Balance: 5020-1740-2310=970

 Oct 5, 2011 (the news are from Oct 4, 2011)

Obviously, the bidding strategy that I used yesterday was not correct since they were not the major factors that affected prices.

And I think the dominant factors affected prices today were the recession of economic globally and the amount of harvest in the U.S. Since the economic slumps recently, the import demand of corn, wheat and soybean from the U.S might decrease. If the U.S could not be able to export their products out, the domestic supply of corn, wheat and soybean might increase (the supply curve will shift to the right) which causes the price of these products to decrease. Since the amount of harvest in corn and soybean are more than what the USDA expected, the supply domestically in the U.S will increase which cause the price to decrease.

Also we have to take a look at the USDA report on Oct 12 since it will make adjustment about report.

Reference: http://www.bloomberg.com/news/2011-10-04/soybeans-corn-wheat-slide-as-economic-slump-may-reduce-exports-from-u-s-.html

Other factors:

-Morgan Stanley is going to invest $7.5 billion in the farms to grow corn, wheat and soybean in Ukraine: price of U.S goes down.

-China continuously imports corns from the U.S: minor factor, although it will cause the price of corn to increase, the factor could not affect the prices as other factors do.

-Warm and dry weather good for the production of corn, soybean and wheat: price decreases

-U.S dollars continuously to be appreciated: increase price, however, according to the news on Bloomberg.com, this could not dominate the prices.

Corn (1 short contract): (1)*(585-605.4)*50=-1020

Soybean (3 short contracts, offset 2 long contracts and take 1 short position):

(2)*(1160-1160)*50=0

(1)*(1160-1163.6)*50=-180

Wheat (4 short contracts, offset 3 long contracts and take 1 short position):

(3)*(604-604)*50=0

(1)*(604-625.2)*50=-1060

Margin Balance: 970-1020-180-1060=-1290

Oct 6, 2011

According to my analysis yesterday, the price should go down. However, the price becomes unpredictable again since the prices of corn, soybean and wheat all go up today!

So let the analysis comes out to my mind and to see what is happening:

Since the U.S reported more hog and cattle, and the price of corn, wheat and soybean are very low relatively, the costs of feeding these livestock decreases, so the farmers will demand more of these commodities. Thus, the demand of corn, wheat and soybean will increase which cause the price to increase.

I think this is the major factor that causes the price to rise today since the farmers could generate profits from purchasing more corn, soybean and wheat to feed livestock at a low price.

Although they happened, I still want to observe what will happen in the next few days to see whether I should offset my contracts and take long position. Since I think this is only a factor that could affect the price in one or two days and could not make great effects on prices. So I did not do anything today.

Corn (did not bid): (1)*(605.4-605.4)*50=0

Soybean (did not bid): (1)*(1163.6-1163.6)*50=0

Wheat (did not bid): (1)*(625.2-616)*50=460

Margin Balance: -1290+460=-830

Oct 7, 2011

Actually I have already found out that the Technical Analysis tools (by looking at the indexes) that I learned from every week’s group discussion are very helpful for estimating prices. However, sometimes the index is very confusing, such as RSI since there could be more oversold when it has already been oversold. From discussion with Lixi and Tasha, I found out that the index of MACD is a very good index of price changes, so I want to take a look at MACD to see what the price trend is.

Corn: the fast moving average (12-week) crosses below the slow moving average from (26-week) from the very beginning of September, and it never crosses above it until now. However, I could see that the spread between fast moving average and slow moving average is getting closer during this week.

Soybean: the MACD trend of soybean is very similar to corn. However, the price spread between the slow moving average and fast moving average is still holding the same.

Wheat: the fast moving average (12-week) crosses below the slow moving average from (26-week) from the very beginning of September, and the price spread between these two moving averages are getting closer and closer, that means the fast moving average might cross above the slow moving average very soon.

However, the news indicates that the production of soybean in South America (Brazil and Argentina) is decreasing which might cause the price increasing in the U.S. I think it might cause the price of soybean to increase by a little bit tomorrow, but it will be affected by other factors very soon later, just like last week, so I do not want to do anything today and just want to observe for few more days.