What do mainstream financial analysts and the famous magician Houdini have in common? Answer: They are both able to perform great acts of illusion.
In 1915, Houdini “made” an eight-foot tall, 6,000-pound elephant vanish into thin air. And today, the usual experts in futures markets have made the giant “elephant” in the room of Lean Hogs disappear in the blink of an eye.
Here’s the gist: In April 2009, lean hogs took step one DOWN of a violent freefall that took prices to multi-year lows in mid-August. It took the usual suspects about .009 seconds to pull one main factor out of their black, top hat of fundamentals: Swine Flu.
Here, the following news items from late April/early May put two-and-two together:
- "Swine Flu Jitters Spark Sell-off In US Hogs." (Reuters)
- "Swine Flu Fears Depress [Pork] Markets." (Wall Street Journal)
- "Swine Flu Story Will Dominate Lean Hog Futures. In the short-term, markets will react to the downside, possibly violently to the downside." (Inside Futures)
Forget the fact that hog prices were “reacting to the downside” long before “H1N1” became synonymous with “Panic.” The turning point in prices began on April 9, more than one week before the Centers for Disease Control & Prevention reported the first case of swine flu in the United States on April 17.
No matter. The harder hog prices fell, the stronger the Swine Flu as Public Enemy No.1 story became. That is, until the market started to rally in mid-August. At that point, the mainstream performed their Incredibly Disappearing Swine Flu act.
The trick was simple: Cease mention of Swine Flu fears as they make no sense now in the context of rising hog prices. Sure enough, in reality, the H1N1 issue had NOT gone away; in fact, the number of countries with bans on US pork soared to 27 by September, prompting the National Pork Producers Council to ask for a $250 million federal bailout for the devastated industry.
Like all magic tricks, just because you won’t find those details in the hog headlines, doesn’t mean they aren’t there. Such is the “illusion” of fundamental analysis.
As for the reality of objective, technical analysis, EWI’s Futures Junctures Service editor Jeffrey Kennedy is the master. Here, the following archive of Jeffrey’s insights into lean hogs speaks for itself:
Right before the tide began to turn for hog prices in earnest, the April 7 Daily Futures Junctures wrote:
“Wave patterns suggest that the end of a second wave [rally] is close at hand. One more modest push beyond 73.90 is all that is needed to finalize this wave... and signal that the decline from the March high is continuing. "
Soon after, the May 2009 Monthly Futures Junctures presented a more elaborate picture of the long-term trend in store for hogs. In its four-page “Featured” market segment, Jeffrey presented the following insight:
“A highly reliable traditional technical chart pattern [the head-and-shoulders] calls for continuing decline into 47.00. Once lean hogs does find its bottom, a corrective advance is expected to develop.”
Hog prices fulfilled this outlook, and then some.
So, what are you waiting for? Find out whether hogs will continue higher in the days, weeks, and months ahead. Subscribe absolutely risk-free to Futures Junctures Service today.