The final result of my portfolio: -27.7% of return.

Diagnostic: huge negative result because of try to hold out the bad results in the belief that long term trends would change the results.

This week I tried to make some desperate changes. I cover my wheat position which make me loss great part of my portfolio value; and buy some oat and wheat. But again, was too late to take advantage of the upward trends and quickly these two grains start on lowering prices.

I believe that the reasons of my bad result were two:

First of all, to think that long term tendencies can make you gain profit. As we know, normal backwardation cannot last in time because this could give arbitrage possibilities. And the possibilities of make profit in the market is in quick movements motivated for information asymmetries or good projection of the historical data (technical analysis)

The second reason, and the most important, was the lack of technical analysis during the chain of decisions along this period. The proper utilizations of these skills allow anticipating changes in prices, giving the necessary information to take good decisions.

On synthesis now I understand that the real probability for speculators to generate profit on this is in the systematic machinery of short term decision that make good results of any jump up or down in prices. Off course this machinery requires  the skill in technical analysis and the whole overview of markets, but even more important, the desires to have the opportunity of make profit every time that prices move.

Week Five Review

The result of my five keeps the same results seeing till now. My portfolio return reaches -25% of losses.

Now the analysis of my positions and future decisions:

Related Wheat, every week I am more convinced that prices of wheat never will be below the price I fixed at beginning of September. There are no closer resistances or patterns that suggest prices will turn around in another downward tendency as shown between Nov 2012 and the end of Aug 2013, instead of that wheat futures for delivery in December added 0.7% to $6.86 a bushel on the CBOT, snapping a two-day decline, as we can see in the last candlestick marked in the graph.

I decided to cover mi position of ten contracts of wheat. This cost me at least 17000.

This decision it not only motivated for the history observed in the data. Recent news suggests that the availability of the grain could be reduced in the future because of delays harvests for weather conditions:

• “Wheat rose on concern that cold weather may harm crops in Argentina and excessive rain might delay harvesting in Brazil, boosting demand for supplies from the U.S., the world’s biggest shipper.” (Bloomberg.com)

Also because of the institutional problems in the U.S, the delay of the USDA export sales report is raising the uncertainty about future supply affecting the prices:

• “The government shutdown, which began Oct. 1, deprived investors of daily and weekly USDA export sales. The monthly reports on U.S. and world supply and demand for major crops including soybean, corn and wheat originally scheduled for Oct. 14 were canceled today, the agency said. The next update will be on Nov. 8.” (Bloomberg.com)

Now the evidence is suggesting buy wheat and soybean, although, the last patterns in the case of soybean are shown more uncertainty than a clear trend.

My strategy for now will be expect to see how soybean and corn prices will operate in the next days after take decisions and try to take long positions of wheat

As a result of my third week of trade, there’s no change in the trend seen till today. My portfolio value have losses of -1.87% and -2.46% in the bought of soybean and in the cover of wheat. Accumulating a -14.43% of return and finishing today with a portfolio value rounding 85000.

Clearly my strategy to look into the monthly trends had not paid off yet, or simply I was wrong.

Despite that in the case of soybean we have seeing increasing prices since October, they are still downward than the prices in early September. However one good sign is the change of trend. In fact, on August crop production report, the USDA, forecast smaller than expected soybean and corn crops fields (http://www.agweb.com), which can be one of the reasons in this increase of prices since October.

Now my bet is the corn. As we can see, the prices had been downwards since September 2012 and now they are slightly starting to increase. Apparently they are in the bottom of a cycle so it’s time to buy cheap and sell high (hopefully) in December. Right now, while US government has institutional problems, corn farmers had harvest just the 10% of their crops, which compared with the average 23% harvested in the past five years, is not a good sign (http://www.agweb.com). This could be one reason to anticipate price increases as a respond for the lower supply of the grain.