NASDAQ’s MACD Update & Seasonal Sector Trades: Planting Delays Pushing AGs Higher By: Christopher Mistal & Jeffrey A. Hirsch | June 13, 2019 | 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 8.4% (656.31 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 Portfolios. We will also review current holdings in the Stock Portfolio and act accordingly. Until that time, all technology and small-cap related positions in the portfolios are on Hold.

 

 

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 2020 contract near the usual June low on or about June 20 and hold it for 160 days until early February. Over the past 49 years this trade has been positive 33 times for a success rate of 67.3%. After failing to deliver gains in 2015, this trade returned to profitability in 2016 with a modest gain and was again successful in 2017 and 2018. More recently, live cattle appears to be on track to repeat it seasonal pattern again this year. Live cattle reached a high in early March this year and has been falling since with early signs of finding a bottom.

 

 

The weekly chart below depicts the Live Cattle continuous futures contract with iPath Bloomberg Livestock TR ETN (COW) overlaid as a solid black line to illustrate how the two instruments trade somewhat 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 very thinly traded averaging less than 4000 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 30, 2019, COW was 59.01% Live Cattle and 40.99% 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 up to a buy limit of $48.50. If purchased, a stop loss of $45.00 is suggested. This trade will be tracked in the Almanac Investor Sector Rotation 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 Bloomberg Cocoa Subindex TR ETN (NIB), Teucrium Wheat (WEAT) and iPath Bloomberg Sugar ETN (SGG) correlate well. However, trading volumes can be even less than COW. Persistent and frequently heavy rains have delayed the planting season this year across many regions of the U.S. Most notably in the corn belt. Futures markets likely do not have the full impacts fully priced in yet.

 

Invesco DB Agriculture Fund (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 $400 million and trades better than 300,000 shares per day on average, offering plenty of liquidity relative to other choices. DBA could be considered up to a buy limit of $17.00. If purchased, a stop loss of $16.10 is suggested. This trade will also be tracked in the Sector Rotation ETF Portfolio. DBA, with 12.3% of assets in live cattle is also a reasonable alternative to thinly traded COW.