1996 SPREAD INVESTMENT LETTER
JANUARY |
FEBRUARY |
| Next we try an intramarket gasoline spread at even money. Luckily, I suggest the spread at "even money" (the horizontal line in the chart) which, for all intensive purposes, is only attained in the last few days of trading. | Time to take advantage of small
capitalization stocks vs. large cap issues. Buy the Kansas City Value Line / sell the
S&P 500. This suggestion luckily is made at the end of a long downtrend and banks over
$26,500 over the next three months. The spread is again suggested in the MARCH letter at a
price of 70, but this level is never hit. |
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APRIL |
MAY |
| When we attempt a live hog / pork belly spread, price does rally about $6,000 from early May to late June but yields much smaller results if entered earlier in April. The target of "even money" (see the horizontal line in the chart) is never attained. | In May, we go searching for a
bond market bottom again by buying bonds / selling notes (the reverse of the December,
1995 spread). How fortunate - the spread reverses a tenacious downtrend in early May and
proceeds to gain about $2,500 into mid-summer. |
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JUNE |
JULY |
| Returning to the meats, we buy feeder cattle / sell live cattle. Although the spread never achieves our target of "even money" (the horizontal line in the chart), it does produce a little over $1,500 which compares quite favorably with the margin requirement. | Back to intramarket heating oil
spreads. The point in the chart is labeled as an "Elliott Wave" first wave up in
the July letter with the comment, " . . . we are in a correction now with the third
wave up soon to come" and "We haven't had a 'blow out' year in this spread for
five years and are due." "Blow Out"
soon follows as the spread shown in the chart gains almost $5,000 in less than four
months. Not bad use of $500 margin! |
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AUGUST |
SEPTEMBER |
| For August, we visit the metals
complex. When the platinum / gold spread breaks its long term down trendline, it quickly
adds $1,300. |
In the September letter, we are awaiting a convincing breakout of wheat over corn which never quite convincingly happens. |
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OCTOBER |
NOVEMBER |
| This live cattle / live hog spread tries the upside in October, fails, and then comes back to end up a little. On the whole, it's a turkey. The "scale traders" make a killing on the volatility. | Next we return to the grain
complex and try a Kansas City wheat / Chicago wheat spread that eventually gains over
$1,200 versus a $400 margin. |
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DECEMBER |
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| Sensing another bond market
reversal, we again reverse the May, 1996 position by buying notes / selling bonds. The
position gains about $2,500 over the next three months or so. |
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