Death or Gold

Moving Average 1 crosses Moving Average 2.  Death or Golden Cross.  Depending.  Almost always whatever was happening then had started a while ago. If you wait for the crossover you'll miss a chunk of what was probably obvious in hindsight.

Here's Soybean Meal with 50 and 200-day MAVGs.


Clearly the crossover signal is slow especially when using longer periods.  The middle line on the chart below shows when the crossover goes from positive to negative. It doesn't work well in faster markets as in 2009.




Instead of looking at the crossovers it's often more useful to look at the rate of change for the crossover i.e. is the crossover turning positive of negative.  The change in colors above shows when the rate of change for the crossover is positive or negative.  Using 50/200-day MAVGs this doesn't generate too many signals -- essentially only seven directional changes since 2008 here.  Of course there are fake-outs and dead markets but not too many.  How does it backtest?  Go to the full version at futures.transmatch.com and pick your commodity and MAVGs and see for yourself.

Curve Flatter

This rather busy chart shows the move for the various Treasury futures and the SPX in the last year.  To my eyes, it's fairly obvious that the enormous gains of the Bond vs the rest of the curve have been caused by repeated moves away from equities in a flight to safety rather than any special insight into inflation or US government deficit funding plans.  The steeper curve was caused by fear.  A flattening one will come from greed. 


You can see for yourself back to 2005 at futures.transmatch.com

Time to buy heating oil and sell gasoline?

No.  That was back in May but don't ask me as I live in NYC and don't have a car or have to pay to heat my luxury coop on Manhattan's tony Middle Eastside. But it's still not too late.  Long HO short RB still looks good until at least September if past seasonal patterns hold.  And who are you going to trust if you can't trust Mother Nature?  BTW the journal Nature says sea levels will continue to rise for several hundred more years no matter what Obama tries to do or Romney doesn't do.  It's baked in the cake.  So if you are interested in beachfront property in Manhattan, call me in about 60 years.

Want to play with these charts?  futures.transmatch.com

Does Gold have a future?

Obviously every hedge fund in the world was buying gold $GC_F day in day out until last autumn and then they stopped.  Gold isn't overbought anymore but clearly there's no enthusiasm.  It's relationship to the economic shocks of the last 6 months (err 6 years) has been tenuous i.e. uninteresting.  Gold was simply the default go to trade for knee-jerk funds who didn't have anyplace better to put their bets.  Now they've opened their eyes to lots of other opportunities. Long and short.  See them here at futures.transmatch.com.  Gold is a source of funds.

The 30-year Bond is still very much overvalued

The 30-year has been the destination of choice for flights to safety for a while.  Out of stocks into the bond.  That's done some damage to the yield curve which we can anticipate will be undone over the next few months if the Europeans get (and keep) their act(s) together.  The chart above shows what about $1M long US and $1M TY short would have done for you since 2006.  What caught my attention is that the spread has never been wider not even in '08-'09.  Too much fear, not enough greed.  Mean reversion can get pretty mean if you are on the wrong side.  These charts will look different next month.

You can plug in your own numbers and assumptions here.  http://futures.transmatch.com/

Dry in the Midwest.

Grains are spiking on drought worries.  There's more upside than downside left here.

Closing the jaws

Until the OB/S lines for the Bond and SPX cross we expect more pain than gain.  If you're long.

Rail Traffic is Down but Up

It's Winter. At least that's what the calendar tells us. Rail traffic always fades in the first few months of the year. But as you can see the 13-wk mavgs are still much ahead of this time last year .

Except for grain and food, rail traffic is holding to the recovery trends from Great Recession levels.


More detail at railfax.transmatch.com