NASDAQ’s MACD Update & Seasonal Sector Trades: Softer Dollar Could Give Commodities a Boost By: Christopher Mistal & Jeffrey A. Hirsch | June 08, 2017 | Email | Print

As of the market’s close today, both the faster and slower moving MACD indicators applied to NASDAQ were positive. With NASDAQ’s gain today, a one-day decline of over 1.7% (108.28 points) would be needed to turn NASDAQ’s MACD Sell indicator negative. 

 

 

When NASDAQ’s MACD Sell indicator becomes negative, we will issue our NASDAQ Seasonal MACD Sell signal and begin clearing out remaining technology and small-cap positions held in the Almanac Investor ETF Portfolio. We will also review current holdings in the Stock Portfolio and take action where needed.

 

 

Beef prices tend to form a seasonal high in March as packers have purchased inventory ahead of the summer grilling season. Then as grill masters supplement steaks and burgers with pork ribs, chicken and other delicacies, beef consumption starts to decline in the hot weather. But beef supplies also begin to dwindle as feed lots are short on inventory. 

 

Live Cattle prices typically hit a seasonal low in mid- to late June and then begin to rise before the school season begins as federal government subsidies for school lunch programs kick in for beef purchases. Consumption continues to increase through the winter and holiday season, generally keeping cattle futures prices higher through mid-February.

 

Our top longer-term seasonal play for live cattle is to go long the April 2018 contract near the usual June low on or about June 20 and hold it for 160 days until early February. Over the past 47 years this trade has been positive 31 times for a success rate of 66.0%. After failing to deliver gains in 2015, this trade returned to profitability last year with a modest gain as live cattle did not reach a bottom until October. More recently, live cattle have been exhibiting strength during its usually weak period. This is typically a bullish sign and when the weaker U.S. dollar is considered, the prospects for another successful trade are further improved. Not to mention the potential effects of China importing U.S. beef later this year.

 

 

The weekly chart below depicts the Live Cattle continuous futures contract with iPath Bloomberg Livestock Sub-TR ETN (COW) overlaid as a solid black line to illustrate how the two instruments trade nearly in tandem. Traders may want to look at futures and options strategies, but others may find COW an adequate trading vehicle.  In any event, beef is likely poised for its typical seasonal move up from an early summer low to a mid-winter peak.

 

 

COW is thinly traded averaging just about 48,000 shares per day on average over the past month, but volume does pickup when Live Cattle (or lean hogs) begin to move. As of April 28, 2017, COW was 63.94% Live Cattle and 36.06% Lean Hogs. Caution should be taken with COW. This Exchange-Traded Note, like other unsecured debt securities with no principal protection, carries inherent risk, primarily issuer credit risk, and the risks with COW may be greater. PLEASE READ THE PROSPECTUS, CONSULT YOUR FINANCIAL ADVISOR AND CONDUCT YOUR OWN DUE DILIGENCE. COW could be considered on dips below $25.00. If purchased, a stop loss of $23.35 is suggested. This trade will be tracked in the Almanac Investor ETF Portfolio.

 

 

 

In addition to Live Cattle seasonal strength beginning in June, Cocoa, Wheat and Sugar also begin seasonably favorable periods in the month. Outside of the futures market, iPath Pure Beta Cocoa ETN (CHOC), Teucrium Wheat (WEAT) and iPath Bloomberg Sugar ETN (SGG) correlate well. However, trading volumes can be thin and there is another choice available to gain broad exposure. PowerShares DB Agriculture (DBA) is a good alternative as it provides exposure to ten different commodities: Live Cattle, Cocoa, Coffee, Corn, Cotton, Feeder Cattle, Lean Hogs, Soybeans, Sugar and Wheat. DBA has assets in excess of $700 million and trades better than 400,000 shares per day on average, offering plenty of liquidity relative to other choices. DBA could be considered on dips below $20.03. If purchased, a stop loss of $18.99 is suggested. This trade will also be tracked in the ETF Portfolio. DBA, with 17.5% of assets in live cattle is also a reasonable alternative to thinly traded COW.