New Strategies of the Week

New Quantity of Contracts Strategy: Use 3 contracts as my baseline. This allows me to be flexible to market changes on a daily basis. For example if I am currently short 3 contracts on soybeans and breaking news like China increased its imports 30% over expectations, I can offset by going long 4-5 contracts depending on how reliable I think the source is.

 New Strategy learned from FRE 501: I look not only at December or November 2011 contract prices, but further into 2012 as well.  Since wheat shows decrease in the long-term future with a small short term increase, I decided to maintain bearish outlook on wheat. But in line with my new Quantity Strategy, I went offered 2 of my short contracts of wheat.

 New Price Strategy: Use overnight tradig to set bid prices.

 

Monday September 26

Sunday night research: (click on the + or the – to follow the link to see why I think each effect would be bullish + or bearish –)

Corn:

–          Weather in Ukraine (-)

–          Brazil, Argentina, US farmers switch crops to higher yielding corn. Inter-temporal LOP suggests more corn supply in future will lead to decrease in prices today (-) 

–          Oil Prices down (-)

–          Strategy: short on corn

Wheat

–          Weather in Ukraine (+)

–          Strategy: Long on wheat

 

Soybeans

–          Brazil, Argentina, US farmers switch crops to higher yielding corn. Inter-temporal LOP suggests less soybean supply in future will lead to increase in prices today (+)

–          India’s soybean meal exports forecasted to increase by 25%  (-)

–          Oil Prices down (-)

–          Strategy: no trade

 

Tuesday September 27

Monday night research:

Corn:

–          Oil prices increased (+)

–          Technical analysis: Corn support at 630 with resistance gap over 682 and directionals are oversold (+)

–          Live cattle futures sharp increase (+)

–

Soybeans:

–          Oil prices increased (+)

–          Technical analysis: Corn support at 630 with resistance gap over 682 and directionals are oversold (+)

–

Wheat

–          Technical analysis: 624.25 as support, 647 is 4-day moving average and resistance at 10-day moving average at 672 (+)

–          Live cattle sharp increase (+)

 

Macro factors:

–          Sources like Credit Suisse and Goldman Sachs say the fundamentals predict price increases, and last week’s price decrease was due to risk-aversion. Further livestock feedlots’ demand for wheat should lend support (+)

–          Traders will likely be buying back their corn and soybean contracts and today crude oil improved which should boost corn and soybean prices (+)

–          Corn will be pushing soybean prices up as farmers who switch from the latter to the former (which provides higher yields) could lead to low inventory levels of soybeans by next summer. The intertemporal Law of One Price suggests we should see an increase in the price of soybeans (+)

Strategy: long across all three commodities

Evaluation of FRE501 Inter-temporal LOP strategy: success

Evaluation of Overnight trading to set prices: success! Entered the market with 5 long contracts of corn, soybeans, wheat by setting bids to 0.1 cents above the overnight Low price. Low prices of corn and wheat dropped lower than anticipated but at least I entered the market in correct direction and entered soybeans 0.1 cent above day’s low price.

Wednesday Sep 28

Tuesday night research:

Corn:

–          (+): Boost in energy prices, Korean imports of corn, weaker US dollar

–          (-): greater supply than USDA anticipated

–          Technical analysis: Slight bearish trend today for corn despite general oversold conditions.

Soybeans:

–          (+): Surge in energy prices, weaker US dollar, less of the crop harvested than anticipated at this point.

–          (-): Crop condition at 53% excellent.

–          Technical analysis: Slight bearish trend today for soybeans despite general oversold conditions.

 

Wheat:

–          (+): Higher energy prices, weaker US dollar, weather conditions within US and in UK.

–          Mixed factors: Bangladesh and Tunisia looking to buy. But based on the Demand group’s research last week, Brazil and Argentina export most of their wheat to these regions so this could have no effect on US markets. However, European wheat hit a one week high so depending on trade patterns this could potentially raise global wheat prices. I lack the knowledge to be able to describe these events as bullish or bearish.

Lisa tweeted a report that corroborates my own research: http://www.futuresmag.com/News/2011/9/Pages/Buyers-looking-for-bounce-in-corn.aspx

 Strategy: No significant changes in fundamentals (as bullish bearish factors seem to cancel each other) No trade

 

 

Thursday September 29

Strategy: Panic from losses from not doing anything yesterday. Research in fundamentals and technical seems to have failed me. Based entire strategy on overnight trading trend which seemed I should offset my contracts long contracts in corn and soybeans which were losing, but keep my long wheat contracts.

Evaluation of strategy: success as I made positive profits.

 

 

Friday September 30

Strategy:  Researched tweets and trader discussion boards regarding anticipation of USDA Quarterly Grains report. Consensus seemed to be go long on corn and soybeans (1) (2).   Also corn disease  as well as short covering recovery seemed to suggest going long would be a great idea.

Logic of my strategy: when fundamentals fail to give a strong signal, attempt to anticipate herd behaviour and bid in accordance with the pack.

Evaluation of basing strategy on less than official sources of research 25k+ loss

Lesson: trust my own fundamentals research.

 

Daily Profit Summary
	Existing Contracts			New Contracts
Date	Corn	Soybeans	Wheat	Corn	Soybeans	Wheat	Net Profit
Sep-26	0	3	5	1	0	-2	-950
Sep-27	1	3	3	-5	-5	-5	680
Sep-28	-4	-2	-2	0	0	0	-10240
Sep-29	-4	-2	-2	5	5	0	1180
Sep-30	1	3	-2	-5	-5	-5	-25750