Dossier Futures: Learning to ride the bear | Business






Breitinger


Our lungs, our tides and our markets cannot last by moving in one direction. Our bodies would perish, continents would flood, and economies would self-destruct if there were no corrections and cycles that created sustainability or relative stability.

A massive move in one direction is eventually followed by a correction, which can be just as significant. For example, stock speculators in 1928, 1987, and 2008 discovered that an overbought market can become a house of cards and disappear overnight if the sell-off begins.

Economists, advisors, and IRA investors are questioning their buy-and-hold mentality and looking at bearish strategies, which can pay off when stocks decline. This is precipitated by recent talk of a sharp rise in interest rates, apocalyptic inflation in Britain, recession in the United States, invasion of Ukraine, economic slowdown in China due to COVID and the devastating water shortages and fires in the United States.

Put options or shorting miniature stock index futures have suddenly become more popular as a way to make money as the Dow Jones, NASDAQ or S&P declines. As of 1 p.m. Friday, mini June stock index futures were down sharply, with the S&P at 3,832, the Dow Jones at 30,700 and the NASDAQ at 11,566.

Wheat and bean trading places

The two fastest growing American crops – wheat and soybeans – have reversed roles in a counterintuitive reversal. The wheat took the tree while the beans bounced up. However, wheat fundamentals appear to remain quite bullish, with data from the National Wheat Growers Association tour indicating a dramatic decline in production due primarily to extremely dry weather in the Southwest Plains.

They expect the total number of bushels of wheat produced to be the worst in 12 years. Soybean acreage is expected to increase this year due to high fertilizer prices that prevent farmers from planting corn into beans that require pesticides but much less fertilizer. So, the wheat market has been on a strong rally against beans for months, but suddenly this week staged a major correction back to normal.

By Friday’s close, July Chicago wheat was trading at $11.70 a bushel, while July beans were trading at $17.04, up about 60 cents on the week. July corn, down a bit, returned $7.79 a bushel. The pigs continued on their way to a surge.

Opinions are solely those of the author. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of a market order to buy or sell.

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