MURICO.com Forum

The final Purchase Index for - - -

9/15/15 was UP +$0.07 AND the model projects that the component on yesterday's kill will be down between -0.05 to -0.35. It appears that packers still have an inventory of hogs purchased at cheaper prices that will hold the index down for another day or so. Historically there is a tendency for the Index to rally starting about the middle of September after the post Labor Day weakness that generally develops.

The weakness of the VVVs this morning has opened the "Gap" to -2.49. A "Gap" of that size can close in a day so it probably does not tell us very much. Perhaps more significant is the fact that the downtrend in the Purchase Index experienced a blip-up yesterday and may signal the bottom of the decline. I came into the day short a couple of VVVs that I covered this morning. A little more dip and I will reverse and get long.

Yesterday I was able to close out quite a few long K/M spreads with my profit target. Some of these trades had been hanging around since early July. I find trading the K/M spread sometime requires a lot of patience that will pay nice dividends if you stay the course.

Yesterday I sold all of the long V/Zs I had acquired last week and reversed and went short a few. Usually the V/Z spread does not expire quite this high.

Sometimes it expires even higher. Last year after Labor Day, the spread was at about the same level as this year then it began heading for the moon. By the time it expired, it had rocketed to 14.65!! That would be some hair-cut to ride that thing on the wrong side! I don't think that will happen this year. There a probably too many hogs for the VVVs to mount a rally of that magnitude this year.

Best wishes,

dhm