Regarding trading right now: patience, patience, patience in the midst of global economic uncertainty, bearish chart patterns in some commodities, a stronger dollar, Russia’s war on Ukraine, and mixed weather signals.
The next big questions I will be answering for traders are:
- 1) Will the Plains states drought continue into next spring and impact winter wheat?
- 2) How serious will the flooding be that may lower the Australian wheat crop?
- 3) When will demand worries and a stronger dollar (which has been bearish for corn) be offset by the potential for bullish corn weather in Argentina?
- 4) How will a change in the jetstream pattern north of Alaska bring colder late autumn weather and put the brakes on the drop in natural gas prices?
Anyway, there are two commodity trades that have been our home runs recently. They were natural gas and coffee. (Some of this is old news now. We already caught the huge move down in prices).
So… what is the best way for you to profit, whether in stocks or commodities?
Listen to what Ted Williams once said (and my comments, below.)
1) Swing within your happy zone:
Basically, this means sticking with markets and products you know best.
In my case, and recent trading advice in my newsletters (see the info and our track record here https://www.bestweatherinc.com/weather-profits/ ): sticking to the highest confidence trades that I know are primarily weather, this time of the year, and were subject to significant profit-taking due to too many speculative (non-commercial) long positions in the open interest of the market. Most recently, these have been short natural gas and coffee over the past few weeks. These were definitely home runs.
2) I’m no genius, I’m smart in spots and I stay around those spots:
I want to lend you my insight from 38 years of experience watching markets and how they react to the weather at “certain times of the year.”
For example, my highest confidence trades in corn and soybeans are almost always during the late spring and summer and during the north American crop season. I also like to recommend grain markets during December-February when I know traders watch South American weather very closely.
Weather is a huge factor in the natural gas market as we go into the late autumn and winter.
For markets such as coffee, the weather is a critical time (now) during the early stages of the Brazil crop cycle: usually between October and December.
That is why, a month or so ago, I went against the bullish crowd in coffee. Take a look at the great early coffee bloom in Brazil due to the rain I forecasted for the Brazil spring, three months ago.
3) Be wary of over-hyped markets:
Some of the most successful investors like Warren Buffett and Ray Dalio are looking for opportunities that others are not.
In other words, catching certain industries early before the crowd and selling into panic and greed. Here too in the case of the soaring natural gas and coffee markets on past fundamentals, it was important for me to look into the future and anticipate a “change in the fundamentals” ahead of time. This is what I do best.
Some markets have already forced out all the longs and are heavily short… natural gas is a good example of this.
Having patience right now in the midst of global economic uncertainty and various global weather fundamentals for grains, natural gas, and soft commodities is no easy task. There are some potential changes to the bearish weather in natural gas with colder late November weather, while the Argentina drought may grow for the corn market. Floods in Australia and the Plains drought are all potential bullish aspects for the wheat market, but it is important to develop longer-term trade ideas based on the third straight winter of La Niña. Feel free to download a complimentary issue of our monthly newsletter Climatelligence here https://www.bestweatherinc.com/climatelligence-newsletter/ and to read about some of our feelings.
If you like it and want to subscribe for a year, my December issue will discuss much more about the energy and grain market.