Larry TV February 22, 2020


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Febraury 22, 2020 Video Transcript

February 22, 2020. Welcome back to Larry TV. I want to look at wheat this week and really focus our attention on this market. Now, we are going all the way back to 2011. Pay particular attention to the green line. This is a small spec index. When the small speculators have been down here, they’re not buying in the market. Typically, this market has rallied as you can see going way back in time. The blue line you see up here is the seasonal pattern. Now as we advance this forward, we continue to see when the small speculators are not interested in buying, wheat usually rallies.

wheatOkay, here we are up to date, a couple of things. The seasonal tendency is to go down. Remember, markets don’t always follow the seasonal pattern. There is a good example right back here. More importantly, if we look at the commitments of traders report we see the red line. That’s the commercials. They have started buying a little bit in here. More significantly, though, look at the green line, the small speculators. This is the most bearish they’ve been going back in time in eternity. In other words, they are just not interested in buying wheat at all. We see that also in the small spec index, and we can see that the commercials have started to buy over the last couple of weeks. That’s bullish, and at a relatively high price. That’s bullish. But as a man on TV says, hold on, there is more.

wheat-spreadA premium has begun trying to get started in the wheat market. The red line is the difference between the nearby contract and the distant. And, we see we have actually started to go to a premium this week. In fact, on the down day on Friday (big down day) the nearby contract was stronger than the next month out, the May contract. And you can see the red line popped up, and it is in a premium. So we are starting a premium in here, in an up trending market where the small speculators are quite bearish in the market. So it’s time to look for trend change buy signals. Now, I think the big up move that we saw four days goes is really the start of all this. So if we can get the formation of a higher short-term low in here, I want to look for and take buy signals in wheat.

corn

 

Corn on the other hand does not look so bullish. We can see the market is oversold, in here. It looks like we have broken out of the big trading range. Look at accumulation in this market. I would expect corn to move lower, which means you could be spread long wheat short corn.


soybeans

 

Looking now at soybeans. They’ve actually been a lot stronger than corn here. There’s a potential buy signal. If on Monday we were to get above Thursday’s or Wednesday’s high, I think that would be a short-term change of direction. And, I would expect beans to go higher.


sugar

Sugar has been in a trading range last 7, 8 trading sessions. A potential short-term sell signal here. If on Monday we were to take out Thursday’s low or Friday’s low, I would expect this market to come back to the downside. I would not rush in here and sell short though until one of those two points are broken. But if they are broken, I would look for sugar to go lower.


coffeeIt looks like coffee is starting the beginning of an up move. However, I don’t want to buy it quite yet. We really haven’t seen any turn-up of momentum. We would like to see momentum turn up, as we saw back here, to tell us the market really is in an uptrend. So we haven’t seen that. We are close to being short-term overbought. I’d like to see coffee pullback, probably this week or maybe the coming week, and then look for a buy signal. So, it is on the front burner clearly, but I’d like to see a little bit more weakness, a bit more basing in here before going long.

natural-gasHopefully, our patience in natural gas will pay off for us here. The seasonal pattern is to the upside starting right here, right now. The commercials (the red line) were clearly accumulating this market. That’s good, and if we look at our theoretical index, they have been very bullish the last couple of weeks. So let’s look at our daily chart.

natural-gas-dailyWe did get above the highest high of the last five or six days. That was a trend change entry. Also trend lines, a lot of good stuff happened in terms of the trend of this market this week. The big question is, will it continue? I think so. We have come back into this gap. Typically, that happens. Nothing to be alarmed about. The trend of momentum has slightly started to pick up, and we are in the oversold place. And accumulation, look at this. It’s been pretty good in here. We are way above the old low back here. That’s nice. So I think what we are going to see is a little more bounce around in here for a couple more days. And then the next time we start to move back to the upside, taking out the highest high of the last one or two days (the formation of a higher short-term low) would be another long entry for natural gas.

In the rest of the energy markets there has been a big difference in the markets. crude-oil We are looking at crude oil now. Now, notice the low on Friday. It barely got back to Monday’s high. That’s crude oil. Let’s look at heating oil.

Oh my gosh, Friday’s low was almost as low as lowest Tuesday’s low, the holiday session. So we see there’s been a real change in this market. The strength is in crude oil. I think we are going to set up some buy signals in this market. You could be spread, long crude short heating oil. If you want to take sell signals, take them in heating oil and buy signals in crude oil, or unleaded which is also been quite strong.

copperI think Copper is getting set up for a sell signal. After all, the trend of momentum (our blue line) is clearly to the downside. In terms of accumulation in here, this week we didn’t see very much. We’ve been in a big trading range in a big down move, right? So trading range in a down move, we should break out to the downside.

So where’s the entry point? Well, we have had a trend line break coming up like this. We tried to rally on Friday. We shouldn’t take out Thursday’s low or Wednesday’s low. If we were to do that, I think that’s a sell signal. Of course, clearly Friday’s low is really important. Taking that out, we are going to go back to the downside, and a potential target in this trade, about 2.40. So we have got some room to the downside here. Just looking for a trend line break and a sell signal in copper.

goldMuch to my chagrin and surprise gold has made new highs. It’s really strong. I was short silver this week. Stopped out, on the sidelines, waiting. I don’t even know quite what I’m waiting for. Clearly the trend of gold has been to the upside. A good spread trade here has been to be long gold, short silver. We have talked about the difference comparatively between these two markets. So, what do we do now in gold? I think it is way too late to buy. This market is really close to a significant peak.

gold-weeklyWe continue seeing open interest at historic highs, and the commitments of traders report shows the commercials increased their selling on this week’s rally. Now remember, this is just a setup. It doesn’t say the market is going to come down right now. But clearly this market is setup for a heck of a decline in the market. But, we have got to have patience. We have to wait for a trend change. It is not here, not yet. So, we are on the sidelines waiting for that trend change.

silverWhat’s probably keeping the markets going is the seasonal pattern which you can see is clearly to the upside. But again, now looking at silver, open interest is at historic highs. Commercials at historic short levels. Public bullish. Funds bullish. This is not the start of a major move. This is where we want to look for entries in the market, but again we got have patience. Wait for a trend change. Then we can do our short selling.

yenProbably because of the coronavirus, the Japanese yen broke out to the downside, despite the fact that we have seen some accumulation in this market. And, the public is not bullish at all, which means we still want to be looking for buy signals. However, because of the bad break we saw this week, it has got to consolidate, bounce around for a little bit. So we are watching this, not long yet. But let’s continue to look for buy signals.

aussie-dollarIt’s also time to look for buy signals in the Australian dollar. We have been coming down for a couple of years now in this market. I think we are pretty close to low here. The commercials got very bullish this week on the buy side. Open interest is high and being driven high by commercials buying. That’s bullish. Again though, we need a trend change. This is a setup market. We have to give it some breathing room. It is going to go back-and-forth in here, but it is a market you want to pay attention to. If you’re an options guy, you could use options on a longer-term basis in this market, of course being on the long side.

dollar-indexThe dollar index is about to come down, and here’s why. Well, the market was clearly setup by the commercials at the first of the year and began a nice uptrend. In other words, as long as we go from this position heavily long, we expect that trend to continue. It’s about over now because now the commercials have started to go back, and they have been more aggressive on the sell side of this market. And if we look at the large funds (the blue line) and the small speculators they have become buyers while the commercials are getting out. So I think we are going to see a sell in this market. Not, again, quite yet. There’s a lot of consolidation we have to go through in these markets. Probably a choppy trading range the next week or so. But in terms of being long this market, have very tight protective stops if you did not get out at the targets we talked about.

bondsThe bond market also broke to the upside this week and again though, guys and gals, we are close to an important top in this market. Look at the green line. That’s the small speculators. It is the most bullish they have ever been. Typically, high levels of bullishness on the part of the small speculators means declines, especially when we see the commercials have gotten out of the market. They didn’t buy the rally. That is a negative. You can see their net open positions. They have been selling this rally. But it’s been a strong rally. So we can’t just rush right in and sell it. We don’t want to step in front of speeding cars. But we do want to pay attention to a trend change in this market as a potential sell point. Not here yet, but again another market want to be looking for. It’s clearly setup to move down.

bonds-spreadAnd speaking of bonds, we are looking at the spread difference as well as the ratio between short-term and long-term bonds. I tried to make some sense out of this, but I really can’t do that. A couple of people asked this week about it. They have moved a little differently. The short terms have been a little stronger. But going back and trying to make some rhyme or reason out of it, I’m not smart enough to do that. So there has been a discrepancy. We’ve seen in the past, but it is nothing I can point to and say “oh, this means we are going to go up or down right now.” It’s happened. Sometimes it is bullish. Sometimes it is bearish. So, for those of you who wrote, that’s the best answer I can give you.

nikkeiThe nikkei continued to show weakness this week. We gapped to the downside, rallied back, and immediately came back. But we see the commercials, (see the red line, that’s commercial buying in stocks for Japan) are close to buy, not quite there yet. But I think we are going to see some support in this area, and when I talk about the S&P’s in a moment I’m going to give you something specific. But I think that this whole area has been an area of support. As I mentioned, I think we are in a choppy trading range affair in a lot of markets, especially stock indexes as well as in nikkei. So buy the big breaks, sell the big rallies.

eminis-cyclesI’m still trying to get a cyclical view of what’s going on in the stock market. This looks like the best one, a low point coming up around March 17th. This is the cycle forecast I have been working with. We can bounce in here. I’ll talk about that in a moment. But ultimately we should see a really good buy point coming in around the 17th of March. So remember, just because these lines go up and down doesn’t mean the market will do that. It may go sideways. What it illustrates is that these are better buying points. These are better opportunities to look for sells in the market.

eminisAnd now here we are, the S&P’s. Okay, really interesting stuff happened on Friday. First of all, we did not make a significant new high in the advance decline line. It is not really bearish. It is not really bullish. The trend of momentum is clearly to the upside. This market has been in big uptrend. So, notice it’s a lot stronger than the nikkei was. We just looked at that, which is back down in these old lows. This has been the strong market. My expectation is, there is a short-term trade here if on Monday we gap up, not down. If Sunday night’s opening is a little bit above about today’s, Friday’s, close that’s going to be bullish. The larger the gap, the more bullish it is going to be. If we gap down, no, all bets are off on that short-term rally. In that case if we see a significant down close on Monday, getting back into this area, then look for a turnaround Tuesday. This is really setup for a Tuesday trade. If Monday is down, a lower range lower close, then I want to look for buy signals on Tuesday.

That’s it. Until next weekend, this is your trading buddy, Larry Williams, wishing you good luck and good trading.


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