There is a strong tendency for production to move in cycles. From time-to-time the bullish euphoria becomes so great that a "Bubble" develops. The Tulip Bubble in Holland in 1637 is a classic example of a bubble and is often referred to as the classic bubble of all time. More recently we have lived through the dot.com bubble, the hog bubble of 1998 when the CME Lean Hog Index plummeted to 17.44 on 12/18/98 and the real estate bubble of 2008.

Bubbles do not occur very often but production cycles are almost routine. It appears that the automobile industry is now looking for a "Trough" in pricing because of over-production.

I don't think we are in another hog bubble but we are looking for the "Trough" in hog prices for this Hog Cycle. Looking back, we can clearly see that we hit the "Peak" in hog prices following the PED out-break. After the "Peak" comes the "Valley" or "Trough". There is not a little old man who will climb to the tallest hill and ring a bell to tell us when we have reached the "Valley". We may have hit the "Valley" last week but my bias is that we did not. There are still too many hogs to be processed this fall and cut outs are showing too much weakness to suggest a bottom has occured. And we cannot over-look the volume of beef and chicken that is coming to market now.

Currently "The Market" is saying that the "Valley" is yet to come. I say that because the ZZZs are priced at 58.10 and that represents another drop of 5.48 for the CME Lean Hog Index. Even is "The Market" has the "Valley" priced correctly, there remains the question of, "When will it be hit?"

Next week?

Next month?

Or just before the ZZZs go to cash settlement??

And so the "Gap" closing dance continues.

My bias remains that the declining Index will push the VVVs back down to the 58.25 they hit on 9/13/17 or lower. But they may pop higher first.

Gary Bielfeldt told Jack Schwager when he was being interviewed for inclusion in THE MARKET WIZARDS, "When you are right and you know you are right, trade aggressively."

I think my read on the data is right and so I have loaded my boat with short VVVs and ZZZs. Not like Dewey would and surely not like Bielfeldt would but I have enough to keep the makers of Tums in business! But I am not - - - Ka!! Ching!!! (Just go interrupted and had to take the profits from a long K/M calendar spread to the bank.) - - - needing them today!!

Best wishes,

Ka!! Ching!! There went another long K/M spread so I am off to the bank again.

dhm