MarathonAlliance.com

Buy: DBA Agriculture Commodity ETF

Minimum Holding 1-2 year

Buy CAD USD att current price for currency heading

Long current price

Stop: Below 12800

Target 300pip move

Sell: 7820

Stop: 7900

Target low 7500

Sell: 16950

Stop: 17000

Target 165  range

A lot of short sighted analysis call the surge in Grain a bubble.  But I feel the whole another way around.  Lets examine the supply side first, the recent national geographic reports show that a the social structure of those developing countries such as China, India, and Latin America has gone through a dramatic change over the past 15 years. Where the next generation of the farmer family have moved away from home to pursuing city lives such as school and work.  This has shown me that the supply is has been and will be reducing in a big margin.  Second,the global climate change is also a huge factor.  Where most farm land are not able to crop like it was used to.  Add these two statement, I am looking for the supply side of these commodity reduced by a big margin.

Second, let me cover the demand side.  In a classic economic concept, the grain will be classified as a necessity good.  Where change in the price and income number will not change the consumption habit of the user.  Moreover, these grain product is consumed by all the nation not just developed countries.  Furthermore, the evolution of technology has caused people use grain as an alternative energy.

By just add these two statement I can see that the future supply of these grain will be very tight, and thing will not look pretty for the people for the next few years.  Furthermore, inflation will be another factor will cause these price to fly.

Now come to the question to do we take advantage or hedge from this.  Like I always said buying and selling a soybean contract is very foolish and is a perfect receipt to lose money.  I think the wise way will be hold on to a Gold Certificate or buy yourself a undervalued real estate.

We have gone through some major turbulence over the past months.  As an investor we should always keep protecting our investment and stay in top of everything going on around the world.

I think as a investor we should focus on the following things  for the next 3 -5 years:

-We should not hold on paper currency other than the country you live because you could never know and you have limited information what is going on over there.  Just like what happen to Iceland.  Very devastating indeed.

-We should hold on to some good undervalued Physical asset such as Gold, Jeweller, Real Estate, Natural Gas.  Etc.  Remember, it has to be undervalued!!!

-I always believe Gold and the basket of previous Precious metal will outperform a basket of currency.

-On the Fixed Income, we want to hold on to some low risk Government Bond not Cooperate Bond

-For Equity, we should always use Option to protect our position

Other than, we should have a balance investment account

On my previous Gold edition, I mention a gold coin has two side.  I think the time has revealed my forecast.  As you can see the surge $USD has put downward pressure on the gold but to a biggest extend.  As we can see:  See Chart 

As we can see the Gold is trading around the 800 Level while the $USD is surging.  At this time last year, the gold was at the low 700 Level.  This also indicate that my analysis on the true value of gold has appreciated despite what the $USD doing.  I have always believe in the concept of value investing, I think in this case is no difference from other.

For the past years, as I mentioned to my partner Sam, I have been incorporate technical into my investment.  He introduced to me variety of choices such as Technical indicator, Wave patter, Chart Pattern, you name ETC.  For the past years, I stick to my technical model into the Chaos Theory. 

Over the weekend, me and my trading team from Oversea have review where the market is right now:

We came up with following hypothesis:  See chart 

This is the TSE Composite index.  As we can see.  The two small top from June- July 2007 Leads to Two medium Top from July 2007- Oct 2008

Then these two top even leads to a even bigger top which is from Jan 08-till where we are right now.  Do we see any clue????

One word more decline is expected for the EURO.  On my Sep 4 Update, I project the top of the EURGBP Pair.  Now I believe more decline with this pair.  Selling on a strength will be a good risk reward ration.  For those with you who trade seasonal cycle for the EURO, do not expected the EURO will come back before 2009.  1.2-1.25 is my target.  The mortgage may spread to the EURO Zone, plus the EURO bank will likely have some bailout as well as rate cut.  I the meantime, I maintain my short position on EUROGBP until it reaches the 1.25 Level

Last issue we have discuss how to use directional strategy to take advantage of the move in cooperate earning.

This week I will discuss way to master a non-directional trading strategy in today’s session.

This strategy is for people who does not wish to analysis the health of the company.  In other word, we do not need to know which directional the market move on the day of the earning.

Lets start by selecting a handful of stock that move the most during its quarterly earning date. Mine will be Google, Apple, MFLX.  I feel there usually anywhere between 20-30 percent move during the cooperate earning date.

T

hen we need to get into a good deal in option before the earning date.  My definition of cheap option is really to get in two weeks before the date.

In this case, we need to buy on both legs since this is an non-directional trading strategy.  My ideal Entry set up would be purchase of  OTM or ATM put and call.  In this case, our max risk will be the value of these two contract.  Lets says XZY stock put and call cost you $3.5 for two legs.  For single contract, your max risk exposure is $350.

Now lets discuss how do we control this risk and how to exit with a profit.  My ideal exit strategy would be as follow.

If the market did not gap during the earning dates, assuming I have lost this trade.  It means that I would need to close my position at the loss.  However, on the bright side, the loss is very little, two- three weeks of time is the max the market has cost me.  Lets say you open your position with $350 in value.  You may get $250 back at the end of the attempt.  You only loss $100! 

If the market does move as we anticipate, we should close our winning leg positon as soon as possible.  Since the market have already made its move. 

For example if the market goes down, you should close the put side, if its vise-verse close the call.  The reason I need to close it ASAP because I believe after the market made a huge move, it tend to go sideway for a long time, you do not want to be greed.  Since I have seen profit on our winning leg, I think most of the time, the winning position often exceed the total cost of both call and put.

In this case, I prefer to leave the losing position open as a bounce.  Bechances sometimes you never know, you market may reverse.