Spread Edge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates.  SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.

Overview

Each week the SpreadEdge Newsletter documents an extensive list of seasonal, technical and fundamental indicators for the various commodity markets.  This article will focus on the Grains and Softs and review the % carry yield and a technical analysis of Corn and Arabica Coffee,

% Carry Yield

Futures calendar curves vary in shape over time. Some often invert, with front-month contract prices exceeding those of later contracts, resulting in positive carry. Conversely, some curves exhibit contango, leading to a negative carry.  % Carry yield is the one-year calendar curve yield as a percentage of contract notional value.  Markets tend to reverse when they get at or near their highest or lowest levels over the past 52 weeks.

• Corn and Arabica Coffee are at their highest % carry yield for the past 52-weeks
• Soybean Mean is near its lowest carry yield for the past 52-weeks. 

Technical Analysis

Corn is very near the lowest price recorded over the past few years despite the 52 week low carry yield.  Diving deeper, the technicals for Corn are sending mixed signals depending on the chart and timeframe analyzed.  On the left is a weekly chart of the front month.  Note that Corn has broken through the downward trendline albeit in very unconvincing fashion.  On the right is the daily chart of the March contract.  Here Corn has yet to reach the downward trendline and doesn't appear to be exhibiting any strength to break through.  Either way you look at it, Corn doesn't look extended and front month market prices are disconnected from the carry yield.

Coffee, on the other hand, has clearly broken through the upward trendline.  However, the candle so far this week looks bearish and toppy.  A retrace to the breakout point appears likely.

More Information

Use coupon code “SpreadEdge” and get the Weekly Newsletter and Daily Alerts for $1 for the first month.  For a limited time, you can receive my Futures Training Videos for free with a 3-month, 6-month, or 12-month subscription.

For a FREE eBook about the SpreadEdge seasonal spread strategy.

The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets.  In addition, spread trade recommendations and follow-up on open trades is also provided.  For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

www.SpreadEdgeCapital.com

Disclaimer

SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.