MURICO.com Forum

The final Purchase Index for - - -

5/18/18 was up +0.34 and the model projects the component on Friday's kill will be up between +0.35 and +0.65. The rate of gain by the component seems to be slowing and I noticed some of the markets were actually a little lower. Perhaps we are seeing the Memorial Day holiday demand surge beginning to taper off. The drop of -1.59 may be confirming that. The model now projects that it will take an average daily component gain of +0.357 to close the June to Index "Gap". With the cutouts being weak and what seems to be plenty of heavy hogs available, I'm a bit doubtful that will happen so I am still short the MMMs but not as short as I was.

Over the weekend I reviewed the data relative to the historical behavior of the CME Lean Hog Index prior to the expiration of the NNNs. Here are some of the things I noticed:

1. From this date until the NNNs expire, over the last eleven-years the index gained an average of 2.96 per year.

2. The maximum it gained during that ll-year period was a huge 22.30 in 2014.

3. The most that it lost during that time period was -8.42 in 2010.

4. There were five-years when the index moved higher and six-years when it declined.

5. On Friday the NNNs settled premium to the component by +9.16 and the model calculates that it will take and average daily component gain of +0.176 by 7/16/18 to close that "Gap".

With the Memorial Day holiday demand now mostly behind us, I am doubtful that we will see that much demand strength so I am planning to get short the NNNs when the MMMs expire. With the spreads I have in place, it is not easy to short the NNNs without messing up my spread portfolios.