This is the first really big day I've had in weeks. I unloaded around a quarter of my Dec Corn from 46-49 and held the rest. Target is 361 although I'm holding out for 366. Wishful thinking perhaps but some of it I own at 4 dollars. Unable orders in Treasury futures continue to haunt me. Because I need occasional sleep (I've been monitoring the markets on a near 24 hour basis for a month now) I often leave ZB orders working during the European morning. I've had success doing that. There's no better feeling than waking up to a fill 9 higher than the current price. Last night no such luck. I was offered at 106.26 in ZB and 105.03 and a half in ZN. WTF! My work suggests further weakness next week in Bonds with perhaps one more shallow rally before we see significantly higher rates. August/September will be the break. Big time.
Hopefully. The bears say this 2004. Uncanny similarities. One diff perhaps is both Beans and Wheat also imploded during that summer sell off. This time they're both buoyant. So far at least. It's all in the clouds. Demand as manifest by tightening in the July basis showed there was some movement early in the week for old crop at these levels but if the Corn in the ground is as good as advertised then a further concession is in order. I certainly don't wish hardship on others so I can profit but I'd like to see a few of those T-storm forecasts for the Eastern Corn belt not come true....
As I've posted on a few other threads, I've been long S&P put spreads for the past couple of weeks. I paid 7 for the 1525-1490 Augie spread and I paid 20 for some 1500 puts. Those 1500's settled as low as 9 after I bought them. I sold half out Thursday (on around a 1481 ES board) for 45! I wish I'd had more on but this break has helped me a great deal. Unfortunately I also sold 30 ZN on Thursday night and dropped almost 20 grand on them. I got a few thou back scalping Treasuries from the short side on Friday. I went home short 10 futures and long 10 Sept Bond puts (109p@45). I wholeheartedly believe that the Treasury market, particularly the long end of the curve, is mispriced at these levels. Because of my bearishness on stocks I'm a bit intimidated to become a hog wild short in fixed income but IMO the hackneyed flight to quality effect will decouple from the weakness in equities. Only a real asshole would lend the United States government money for 30 years at 4.95%. Corn as some of you know cost the Pabster a cool C-note on that massive break. In retrospect no big deal. Between Cotton, Bond scalping, index shorts and catching a dime in Corn this week, I've gotten about 65% of the money back. (commissions are running me 20-25k a month lately)Such is life. In many way's I'm fortunate I didn't blow up. My risk controls could have been better but then again they could have been worse too.
<i>"I certainly don't wish hardship on others so I can profit but I'd like to see a few of those T-storm forecasts for the Eastern Corn belt not come true...."</i> May & June we couldn't buy a raindrop, corn was curled up like sorghum. July rolled in, it rains every other day. Corn looks fantastic, and every idle acre not being paved for another Super WalMart is in corn. Nil soybeans, no buckwheat, nil wheat, zero oats, no sunflowers, far fewer potatos (Frito Lay)... every field in two states here is corn. Gotta love that for the deer population and other critters, but the corn harvest from NY and PA is going to be several times what once was.
I've been selling ZN at 107.205 tonight. I'll buy a few in as a scalp but depending on the action I'll keep some for my core short position. Risking Friday's highs. I'll sell ZB also at 110.04 I'm looking for ZB to be under par in September.
I have a scenario worked out. We'll see if it works. I'm long S&P puts and short Treasuries. Seemingly "spread". IMO the Index trade will find swing lows around 1431 in SPX and around 13,050 in the Dow. That could come to-morrow or early this week. While I expect Treasuries to rally on further stock weakness I'm betting ZB and ZN don't rally much. When stocks start this anticipated rotation higher, perhaps back to 1490 or so, bonds will then break like mad. In fact I believe it will be interest rate jitters acting as the catalyst for a further equity break that will commence this coming fall. The subprime bs will be out of the news and long forgotten by..oh...let's say this Thursday. Then it'll be biz as usual. Stocks short covering in methodical, low volatile fashion while Treasuries hiccup over the duel agony of no imminent Fed relief and rising inflation.