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Walt Downs wrote an interesting post on Aug 8 about El Nino, Coffe and
Soybean meal.
I have been following Bean Meal lately and I am trying to figure out what
is happening.
Usually back months in any commodity is more expensive than front months.
With bean meal it is the other way around, and Walt has explained to me the
fundamental reasons for that.
But lately (last 7 days) the spread has increased dramatically together
with a run up price, i.e. front months are getting much more expensive than
back months.
What is the theory behind such a move?
Can it be considered bullish or bearish?
Would the same answer be valid for other markets where back months usually
are more expensive than front months?
Technically SM has broken different levels.
SMU has broken previous (5/16) top and is now at contract high
SMV has marginally broken last high (5/16) but closed below.
SMZ has broken out of large triangle upside as well as broken out of double
bottom (close basis).
SMZ has also marginally broken out of a gigantig "flagg" on a Gann Dec
Chart (are trendlines reliable on Gann Charts?)
SMZ volume behaves like price, follows the double bottom perfectly. Looks
very bullish.
But if you look at the price curves for all these contracts, they look
really scary. A classic parabolic rise in all three.
So the BIG question, is this a break out or a top????? Does the spread
issue give any clue?
regards
stig
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