by David Moore
For the most part, Mad Cow disease is a dead horse.
The health dangers may well be real and important. But since the initial December 2003 discovery of BSE in Washington State, speculation about its impact on markets hasn't changed much.
Yet last week I finally came across a related story. On September 17, the monolithic Japanese noodle restaurant chain Yoshinoya offered guydon noodles with American beef for the first time since their government banned imports from the U.S. almost three years ago. Big hairy deal right?
Well, it was for the Japanese. Mobs gathered outside Yoshinoya locations throughout Japan. Lines formed before dawn and by opening time were wrapped around whole city blocks in Tokyo. Young men were interviewed who said the Mad Cow ban only made them more hungry for American beef.
Still, my amusement was short lived. Within a few paragraphs, each story about the affair turned its focus toward its anecdotal connection to supply and demand.
Which makes me think it's time to revisit the facts about Mad Cow, markets and Japan's ban on beef one more time.
Prior to the ban, Japan had been a top importer of U.S. beef, and the most rational fundamental forecast back in late 2003 was for export demand to fall and prices to plummet.
Instead, both beef markets turned up within days of the initial BSE announcement. What's more, the ensuing rally quickly carried feeder cattle contracts to new record highs.
Despite all the fuss, prices apparently didn't much care about the ban. It may have accelerated a decline that had begun weeks before Mad Cow hit headlines, yet price levels in beef have hovered well above historical averages for all of the past two years.
Longtime readers of Futures Focus are already familiar with this story -- we've presented these facts here before.
Yet the story bears repeating now, and not just to clear up fundamental confusion about Japanese noodle shops. There's good reason to return to the objective market data that does matter : Recent price action in both cattle markets begs attention.
Clear Elliott wave patterns on long term charts prompted analyst Jeffrey Kennedy to feature these markets in his Sept. 15 Monthly Futures Junctures. It took less than a week for the first good opportunity to emerge: Jeffrey's Sept. 21 Daily Futures Junctures reveals a setup that is plain to see, all the way down to swings on the 15-minute chart.
Now it looks like a budding third-wave opportunity is poised to blossom. If so, the next weeks will see an impulse that dwarfs the recent move.