Time-Out

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Today was a needed break. Not from the markets as a whole, but really from having an open position. For the first time since I started this whole adventure back in June, this was the first time that I didn’t have an open position and also most importantly in soybeans! I needed that. It was time I took a step back to assess my progress so far and also to reacquaint myself with the myriad of other commodities out there other than, that most versatile of grains, the soybean.

Soybeans, if you are interested, actually closed up 7.25 cents. A lot of the news stories I’ve been reading have been talking about how the commodities markets shrugged off the continued recovery of the dollar today. I’ll admit that I was a little surprised to find that after yesterday’s drop, but should I really? It seems typical of the panic and fear that frequently visits itself upon the exchanges. There one day and gone the next.

I have no regrets however, I stuck to my trading plan such as it is. I had placed a reasonable stop loss based on the Average True Range and a weekly low. In fact, I didn’t actually realise how close the price was to my stop loss until I checked my account and found that it had been hit. Previously, I probably would have moved my stop loss lower as the price moved lower and this time that would be working out fine for me at the moment but in the long run, such an action is simply inviting ruin.

I’ve been trying to bring in cognitive biases into my posts as they are an idea that I find very useful for looking at my own behaviour. Curtis Faith provides an excellent explanation of some cognitive biases that can impact on trading in his book, “Way of the Turtle.” I am sure that I will be discussing this book at some later stage. For now, I just want to talk about the outcome bias. This is a tendency to judge how good a decision was, based on its result rather than the factors that went into why the decision was made. In the past I know that I would have been really annoyed with getting stopped out and I would have been frantic to get back in. Today, I had no such feelings. I think that is progress.

Instead, I read up on other commodities such as gold, silver, copper, coffee, sugar and oil. This is part of my fascination with the markets, all these every day items that are traded across the world and each day there is a power struggle to either push the price up or down. It was good to be able to broaden my horizons again. I also read some interesting articles on trading specifically on trading discipline and expectancy. Both seemed to be timely reads for me.

I’m not sure if I’ll open any positions before my WRAP UP this weekend, it seems unlikely that I will as I haven’t found the time to do any serious analysis of any trends in the markets. Instead, I think I’ll just enjoy this unexpected time-out.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

Stopped out of Soybeans

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I was expecting Soybeans to close lower today, but nowhere near limit down. The market touched limit down during the session and just before that I was stopped out. The overbought nature of the market and the pressure of harvesting were finally able to push the price down with the strengthening of the dollar as the catalyst. Wheat and corn closed limit down for the day and it will be interesting to see how much further wheat will fall.

Having no positions now open, I have a decision to make, whether to take my money and set it aside to build up a reasonable stake once more or to open another position in something. Initially I was leaning towards putting the money aside for the time being. However right now as I see that this correction was across the board, including not just grains, but metals, energies and softs, I think I might instead see if there is something that is worth getting involved in.

So much for my worries at the weekend of feeling comfortable with my position in soybeans. If I don’t quite feel the hunger, I’m not feeling the fear. Of course, I have yet to pull the trigger. I won’t be getting involved tomorrow, it’ll be the following day at the earliest before I open a new position. In the mean time, I will be looking at everything to see what the possibilities are at the moment.

Open Positions

None

Account Details

Account Balance: €585.48
Open Position P/L: €0.00
Account Position: €585.00
Overall P/L: -€1464.52
   

links for 2007-10-02

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A Day of Waiting

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I think you could best describe today as a day of waiting for soybeans. It was a tight session of trading, with the high of $9.98 and a low of $9.90 and only closing up a 1/4 of a cent. There wasn’t much change from the information available last Friday. Over the weekend, the USDA announced that they wouldn’t be opening up any more acres which probably accounts for the slightly higher opening of $9.96 but there was no attempt to break the $10 mark nor much effort on the downside.

If everybody was waiting for some direction from the crop progress report, there wasn’t a lot of change there either. The harvest is well under way with 29% of it complete and there was a slight downgrading of the crop condition by 1%. That might provide a gust of wind tomorrow, but it feels like we’re back in the doldrums.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +0.63

Account Details

Account Balance: €271.48
Open Position P/L: €513.52
Account Position: €785.00
Overall P/L: -€1265.00
   

Too Much Fear, Not Enough Hunger

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Today is the end of September, and last Friday saw a lot of funds moving money around at the end of the month. I’ll assume that there will be some carry over of that change around tomorrow. For me though, things haven’t changed all that much from last week. Soybeans finished the week +12 cents and there is no signal to get out yet. I’m not even going to change my stop loss this week, as I’m happy with where it is at the moment. The coming week may have choppy waters as the news at the tail end of last week percolates through the market and it decides what it’s going to do.

Wheat is tantalising. I don’t know how much higher it’s going to go but the knowledge that due to my own mistakes I have lost out on the biggest move of the year is frustrating and infuriating. In short, I’m afraid of it clouding my judgement. Then there’s the fear, that just as I get in, it’ll reach its top and then start the slide down. In truth, it’s more likely that it’ll go up and then move sideways for a while before falling back down again.

As I look around the various commodities that I have been interested in and keeping an eye on for the last few months, I see that a few trends appear to have started, but again I’m feeling the fear. If you’ll forgive a metaphor. I feel like a hunter who’s been knocked up badly not so long ago, let’s say an elephant. I barely escaped with my life but now I’m back out on the plains and I’ve got a few animals within range. As I line up the sights, my eyes lose focus and I can’t pull the trigger. I can feel that some of these trends could be big movers in the months ahead, but I just can’t seem to get over the experience of being almost wiped out.

This fear is affecting my hunger for the markets as well. I’m comfortable with soybeans at the moment, that’s all that my trading diet consists of right now. I’m too afraid to branch out into other markets, due to this fear of my account getting wiped out and the idea that I’m too late to get in on these trends. I need to get out of this state of comfort and back into a mindset where I have the hunger and I can lose the fear. So that’s my little assignment for the week, to get back into the game and stop sitting on the sidelines.

Seesaw, Margery Daw

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So much, for no surprises in the USDA’s grain stock report. Soybeans came in at a record 573 million bushels, well above estimates. Having read the report when it came out, I expected today to close well down. It did, all but reversing yesterday’s gains. Those extra 20 million bushels in the current stocks provide a little more leeway for next year’s inventories.Some analysts are indicating that today’s lower close was more to do with end-of-month profit-taking than anything else. That may well be true. The market made more leaps and bounds this week, so I would expect the usual profit taking to happen. In any case, I don’t see that the underlying fundamentals have changed. I note that China bought another 120,000 tons. Then again, Bloomberg is reporting that Palle Pedersen an “agronomist” at Iowa State is feeling very confident about this year’s crop for soybeans:

“The crop is going to be very good” and “Farmers are very happy with the yields they have been harvesting.”

This is part of my fascination with the markets, they are almost always so contradictory in nature. One day, they move up, the next they move down. (Unless it’s wheat it seems.) A simple idea such as the colour of grass is purple one day and pink the next, sometimes its even orange and blue at the same time. The bears and bulls sit on opposite sides of the seesaw, taunting each other:

Seesaw, Margery Daw,
Johnny shall have a new master.
He shall earn but a penny a day
Because he can’t work any faster.

Monday is a new week and I have no idea which way the market is going to go, except for wheat, it’ll probably go up.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long -17.62

Account Details

Account Balance: €271.48
Open Position P/L: €511.00
Account Position: €782.48
Overall P/L: -€1267.52
   

Break on Through to the Other Side

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Soybeans sailed right on through the $10 mark. The underlying fundamentals have been stacking up for a while now with increasing demand and falling supplies and since August have manifested themselves in a huge push upwards of the price. No doubt, the falling dollar and the continued march upwards of wheat have also been a major influence and today was no different.Wheat made a new record today at $9.3925. If the fundamentals are strong in soybeans, then they are doubly so for wheat at the moment. It is possible that what we have been seeing in wheat recently will be happening in soybeans next year. This all depends on how the planting goes in the coming months. If wheat continues upwards as it might do and reach its own $10 mark, then soybeans are going to be hit hard and won’t be able to recover the 5 million acres that it needs to.

The new record in wheat doesn’t evoke much regret anymore and I’m starting to think that perhaps I should get back in with a new long position. Then again Jim Rogers has already stated earlier this week, that he wouldn’t buy wheat at the moment; “I don’t like to jump on a moving bus.” I respect that man’s opinion. So I start thinking should I be entering a short position in wheat, before I finally come to my senses and remember that I do have a plan and any time I have strayed from that, the result has been serious damage to my account.

Back with soybeans, the USDA reported export sales at 745,600 metric tons, nudging close to the upper end of estimates. A new three year high was hit at $10.1775. Prices were last at this level in May 2004, when it hit a high of $10.64. Prices are still a bit away from that but the March and July ’08 contracts did reach $10.41 today.

Tomorrow is another Friday and there is another report due out from the USDA, this time on grain stocks, so there is some new info for the market to play with but the consensus appears to be that there will be no suprises. So I’m expecting the usual short-covering towards the end of the day tomorrow following this week’s continued action breaking upwards.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +18.63

Account Details

Account Balance: €271.48
Open Position P/L: €583.52
Account Position: €855.00
Overall P/L: -€1195.00
   

Support Stronger Than Expected

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Well, I guess I was a little right. Planting is providing the support, it’s just a lot more than I had anticipated at the moment. The factor’s haven’t changed, Brazil and wheat are still the major reasons behind the support. Dow Jones‘ outlook for the day had it summed up in their opening line:

Soybean futures on the Chicago Board of Trade are poised for a higher start to Wednesday’s day session, taking their cue from the overnight theme, as bullish underlying fundamentals absorb seasonal weakness

Add in China, with speculation that they will be increasing imports as their own output is expected to fall to an eight year low, and there was plenty of things for the bulls to run with. High of the day was 9.92, so the $10 mark is yet to be reached, but it didn’t close far off of the high at $9.90

There’s a lot more concern about the harvest today, even with the report earlier in the week that the crop condition was improved. Any ideas that the USDA’s prediction earlier in the month might have been too small is seemingly evaporating.

There’ll be more news tomorrow with the weekly export sales from the USDA out. Expectations are higher this week, between 500,000 and 800,000 metric tons. Friday will see the USDA report on current Grain Stocks. Having left the relative doldrums of the last few day’s little to no news, which way will the wind now blow?

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +17.13

Account Details

Account Balance: €271.48
Open Position P/L: €506.52
Account Position: €778.00
Overall P/L: -€1272.00
   

Harvesting Pressure, Planting Support

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I did catch some of the market action today and it seemed to me that wheat was pulling up corn and soybeans for most of the day. In the end though, with wheat giving up some of its earlier gains towards the end of the session, the short-term factors weighed heavily on soybeans with the harvest underway and yesterday’s USDA report indicating a better crop condition. The question now is, how much will the coming harvest impact on the bidding for next year’s crops. Northern Brazil still has weather that is too hot and dry for planting and will continue to be like that for the next couple of weeks according to the forecast. I note that soybeans today closed 3 1/4 from the low and 9 off the high. I think I can expect more days like today, with the price of wheat being the supportive factor.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long -5.87

Account Details

Account Balance: €271.48
Open Position P/L: €437.52
Account Position: €709.00
Overall P/L: -€1341.00
   

Unnoticeably Quiet

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I wasn’t keeping an eye on the market at all today. I just about caught the pre-opening reports but other than that I didn’t see much. All in all, I don’t appear to have missed anything. The news this morning was about Paraguay and the expected good harvest there. Soybeans opened a little higher and traded in a fairly tight range, before closing -0.25. There was some news about another sale to China, but really it was just a quiet Monday.

The USDA released the weekly Crop Progress report as they do after the market closed and it wasn’t all that surprising. 12% of the crop has been harvested which is slightly below the expectations I’ve been reading. The crop condition improved some more and this will be an interesting factor in tomorrow’s movements.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +0.13

Account Details

Account Balance: €271.48
Open Position P/L: €462.52
Account Position: €734.00
Overall P/L: -€1316.00