Traders and commentators often use the phrase, “Dog days of August” to describe market action. Unfortunately, the general public seems to view this as a statement of late summer weakness, rather than as the low volume, stagnant, range trading action that it actually means. The S&P 500 has been in a 5% sideways trading range between2020 and 2120 since February. We’ll look at option, technical and seasonal analysis that could push this market to new highs and break the summer doldrums.
The live cattle market spent all of spring and early summer in a tight trading range roughly bound by $155 on the high side and supported near $147 on the low side. The market has finally created some action by falling through the support near $148 over the last two weeks with the current low now near $145. 50. Chart readers would see the fall through this level as a breakout and anticipate further weakening of the cattle market. However, there are two very good reasons this may be a short trap triggering a reversal rally into expiration.
It’s been an exceptionally confusing week to trade on a discretionary basis. Rarely can I recall a time when the markets have been more unsure of their next move. Fairly well every financial market has LOUD voices on both sides making good cases for their positions and their market forecasts. Between the FOMC meeting and the constant worry about whether or not or, when Greece will default has made picking a side based on theory and economics all but impossible. Despite this, we managed to remain fairly unscathed trading feeder cattle, Eurodollar and 30yr Treasury Bond futures; even a bit profitable.