Jerome Powell is a little less hawkish
23 March 2023
A new and important partnership
3 April 2023
Those who have been following me for a while, and those who have read my books know this. It is not with those two or three little rules that they teach in the courses that you will be able to earn consistently in the world of commodities and spread trading. You cannot reduce the analysis to an algorithm, to a scheme: "true, then I do this", "false, then I do this other". In this way, the only ones who will make money will be course sellers who, most likely, have never done spread trading.
Analysing a spread is much, much more complex. There are aspects and nuances that have to be taken into account. Of course, some of these are acquired through practice, through experience, but if you do not get into the right frame of mind from the outset that the analysis of a spread must be done at 360 degrees, looking at and sifting through everything, well, then even experience will serve you little.
I do not publish many analyses on the site, usually, when I do post one it is to draw attention to certain aspects. This is both because of lack of time and because I get fed up with people looking at the site as a kind of "list of operational signals". Mine is an educational site; except for the books, it is totally free. It teaches you things you cannot find anywhere else, and I also dedicate part of my time to you by answering your questions and clarifying your doubts. You are luckier than I was when I started.
On 28 January, I wrote the article "Analysis of corn and some calendar spreads". In the article, I raised doubts as to whether the corn spreads would respect seasonality. Especially two of them, ZCK23-ZCN23 and ZCN23-ZCZ23. The reasons can be found within the article.
A little over two months later, the chart situation is as follows.
The first spread had a much more pronounced bullish movement than the second, which was also much more volatile because the two futures refer to two different crops and the negative USDA data that came out in February-March affected the July delivery much more than the December delivery (in fact, the ZCK23-ZCN23 spread, two deliveries on the same crop, had a much smaller drop). However, this did not cause the spread to collapse and the price is at the end-January levels.
But beyond that, what is important is that for the third year in a row, the two spreads moved at much higher price levels than in previous years, as confirmed by the two charts below.
Those who followed seasonality, without delving into why in the previous two years the spread had behaved so differently, took home a loss (perhaps those who sold the ZCN23-ZCZ23 spread may have gained something thanks to the USDA). I know several traders who... "seasonality is bearish, price is high, I sell the spread". Maybe there was also a bearish RSI divergence... Because that is what they were taught in the courses.
Unfortunately, in order to attract as many 'do-gooders' as possible, these self-proclaimed gurus pass on the message that spread trading is easy, you just need to know the seasonality and do a simple analysis that even Stephanie, a housewife, and Robert, a land registry clerk (the fake reviews), are capable of doing.
Well, if you believe that, I have some bad news for you. If you want to learn spread trading (or more generally trading), there is work to be done, there is an effort to be put in, and there is a study to be done. There is to understand certain aspects and there is to ask yourself questions in certain situations. Otherwise, it becomes like betting on a sporting event.
“I bet that France will win the next European football championship”. I am certainly much more likely to “win” than by opening a spread trade following what is taught in online courses.
Those who have been following me for a while, and those who have read my books know this. It is not with those two or three little rules that they teach in the courses that you will be able to earn consistently in
I am a macroeconomic and financial analyst with over 30 years’ experience, including two years as a fund manager. I specialise in currencies and commodities, and I am the author of several successful books on trading, macroeconomics, and financial markets.
