04-07-2019: May Oats: Cancer Scares Remain

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

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Introduction

A lot of oats are used in pet food and feed products as well as people food, but a scare about oats containing cancer-causing chemicals starting as far back as two years ago remain prevalent dominating oats news stories. Their overwhelming presence is fed by recent lawcase settlements in the millions and millions of dollars against chemical makers and food producers found popularly on grocery store shelves. Somehow oat futures prices have been resilient, even more than for other grains, but they may begin to play "catch-up" on a downward slide. Our technical indicators are somewhat mixed with prediction probability of success low but we think they lean toward the buy side for reasons not entirely apparent..


Intermarket Analysis

We fed Oats, Corn, and Soybeans into a neural network to get the following result:




Parabolic Chart

May Oats:

Parabolic Chart


Nirvana Chart

May Oats:

Initial Chart


News Analysis

News on oats still appears to be dominated by a story started eight months ago that poisonous cancer-causing weed-killer such as "Round-Up" was found in granola bars and children's breakfast cereals with Quaker Oats "Old Fashioned Oatmeal" having the highest concentration of more than 1,000 parts per billion. Normally, one would think that would be bad for oat sales and oat prices reducing demand and producing a glut on the market. General Mills Cherrios and Kellogg's Oat Bran was also found to contain some. A precedent lawsuit against Monsanto, maker of the weed killer resulted in an $80 million final settlement of a lawsuit against Monsanto (originally awareded $289 million by a California jury before appeals), maker of Roundup, and Bayer, maker of other herbicides. Quaker oats had to do a recall, and is undergoing a class action lawsuit against Pepsico, its parent, filed in November, 2018. Harmful chemicals were also found in five out of seven "organic" oat food products tested as well. Headlines regularly are appearing, "Are oats safe to eat?" Gllyphosate is the primary carcenogic chemical found in oats and the International Agency for Research on Cancer said oat products such as Quaker's should never have been branded as "health foods." Objections to labels such as "100% Natural" and "eco-friendly" were discouraged. Quaker Instant Oatmeal is one of the most popular products used by customers including even some of our own traders who buy Quaker Oats Instant Oatmeal "lookalikes" private-label substitutes offered by grocery chains such as Kroger, Fry's, Ralph's. Our staff reached out to Kroger for comment to ask if their private label look-a-like instant oatmeal brand was supplied by Quaker or Pepsico, and we were informed by the very large grocery chain representatives that they "were not allowed to give out that information."

There are ongoing lawsuits against General Mills, Pepsico, and Kellogg's with strong precedent results from herbicide manufacturer settlements of similar lawsuits.

Monsanto tried earlier this year to bury similar stories. But more and more stories including sources such as the Federal Food and Drug Adminstration are involving smaller makers of oatmeal products such "Bob's Red Mill" products. The scary truth is that there are much more potent sources of cancer found on grocery shelves such as canned tomatoes, hydrogenated oils such as soybean oil (but not olive oil which is not chemically extracted), high-calcium products such as milk, processed red meats, common breads containing potassium bromate, refined sugars, alcohol, and saturated fat found in snacks made with vegetable oils, fatty meats, processed cheese and butter-based deserts. It almost sounds like, "Either starve or get cancer."

Oats have other uses including animal feed, dog food, odor absorbers, skincare products and modeling clay. Oats have been found to benefit weight loss. Oats have also been found to cause intestinal gas and bloating. Health organizations advise people with diabetes, anemia, celiac disease, and intestine patients must not consume oats.

There are two types of oat cereals available, rolled oats and steel cut oats. Each are advertised as having advantages over the other. There is almost a current war going on regarding publications and studies of health and benefits of oats provided by manufacturers and dangers and side effects presented by health organizations, resulting in a confusing cacophony of contradictory misinformation out there.

Oats were in the group of commodities that fell between 1% and 3% in price in the first quarter of 2019. Analysts hesitate to predict what will happen to oats in the second quarter. But weather reports from South America are expected to most influence grain prices overall. Use in biofuels and also trade issues will also dominate, especially trade with China.

In Australia, many popular oat products are being pulled off the shelves of grocery stores as grocers refuse to pass on increased costs of oats to consumers. This is particularly affecting pet food products. In Australia, farmers are doing early planting of lots of oats, canola and wheat before rolling over into barley.

"Wallet Investor" is a website that is projecting a 2019 price of $297/bushel versus $280/bushel recently. But skittishly it also sees a potential for oat prices to crash.

Oats among grains have resisted bearish trends in the grain markets significantly more than others. Canadian oat export projections are bullish with smaller carrryouts at the end of the season.

Oats acreage planting intentions are misleading or unreliable in some cases because some acres are sown oats that are intended to be harvested for hay or used to graze livestock.

Farmers recently have felt they can get more favorable returns by planting corn instead of oats.

We have to feel that the overwhelming dominance of news on oats relating to the cancer scare has go to be affecting consumption in a major way despite what futures price have been indicating recently. While there is no direct provable link to the news and overall consumption, as many people ignore the news, we feel it has just got to turn the overall news picture for oats to a negative one.


Point & Figure Chart

445.0I                                                                  T  4/ 4
     I CBT - May-19 Oats, 5000 bu., c/bu           Cm.=0.60  Lim.=12.0
     I
     I
     I
425.0I_________________________________________________________________________
     I               X
     I               XO
     I               XO
     I               XOX
405.0I_______________XOXO__X___________________________________________________
     I               XOXO  XO
     I               XOXOX XOX
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     I               XO OXOXOXOXO
385.0I_______________XO_OXOXOXOXO______________________________________________
     I               XO OXOXO O O
     I             X XO OXO     O  X
     I             XOXO OX      O  XO
     I             XOXO O       O  XO  X
365.0I_________X_X_XOX__________O__XOX_XO______________________________________
     I         XOXOXOX          O  XOXOXO
     I         XOXOXOX          O  XOXOXO
     IOX X     XOXOXOX          O  XOXO O
     IOXOXO  X XOXOXOX          O  XO   O  X X
345.0IOXOXO__XOXOXOXO___________OX_X____O__XOXO__X_____________________________
     IOXOXO  XOXOXO             OXOX    O  XOXOX XO
     IOXOXO  XOXO               OXOX    O  XOXOXOXO
     IO OXO  XOX                O OX    O  XOXOXOXO          X
     I  O O  XOX                  OX    O  XO OXO O          XO
325.0I____O__XOX__________________OX____O__X__O___O__________XO________________
     I    O  XO                   OX    OX X      O      X   XO
     I    OX X                    OX    OXOX      O      XO  XO
     I    OXOX                    O     OXOX      O      XO  XO    X
     I    OXOX                          OXO       O      XOX XOX X XO
305.0I____OXO___________________________O_________O______XOXOXOXOXOXO__________
     I    O                                       OX     XOXOXOXOXOXO
     I                                            OXO    XOXO OXO OXO
     I                                            OXO    XO   OX  OXO
     I                                            OXO  X X    OX  OXO
285.0I____________________________________________O_O__XOX____O___O_O____X_____
     I                                              O  XOX          O    X
     I                                              O  XOX          O  X X
     I                                              O  XOX          OX XOX
     I                                              O  XOX          OXOXOX
265.0I______________________________________________O__XOX__________OXOXO______
     I                                              O  XOX          O O
     I                                              OX XOX
     I                                              OXOXO
     I                                              OXOX
245.0I______________________________________________OXOX_______________________
     I                                              OXOX
     I                                              OXO
     I                                              O
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225.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
                                    1111111               111111111
       2233444556666666777777778888901111221112233344566890111111121133334
       0012112110000223000112230023120001121231200101002112011222301201120
      02807778592689180357244812750961396327505611496872594526089060862583
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical high and are in a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "%R". It is giving a buy signal.

Internal Printout 1 Internal Printout 2

Results of "%R" for Oats (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results


Third System Confirmation

Our third system has triggered a buy signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $50. Initial margin on a single contract is $798. Use of options is not advised.


Historic Range

Scale traders are not a factor in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Commercials with the best track record are remaining short but gradually getting increasingly-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that a change in major trend to up is imminent at a volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) Oats December 250 Put and Sell (1) Oats December 260 Put @ 5.00 to the sell side or greater.


o 1 o 2 o 5


o 3


o 4


Calendar Spread

What the May - Dec. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down in the long run. The best time to enter or leave the above spread is when it is at 4.00 or narrower selling the far as prices are falling and then buying the near, and exiting or entering when it is at 29.00 or wider buying the far as prices are rising and then selling the near. At this time, we appear to be at the buy the far, sell the near point which is a conflict with other prognostications in this report.





Level Table:

Level Table

This one is very hard to gage, but we'll say the path of least resistance is down.
345.0|                                                                  T  4/ 4
 CBT - May-19 Oats, 5000 bu., c/bu           Cm.=0.60  Lim.=12.0
     |
     |
     |
335.0|Q________________________________________________________________________
     |Q
     |Q
     |Q
     |Q
325.0|Q________________________________________________________________________
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     |OOQQ
     |OOOQQQ
     |OOOQQQ
315.0|OOOOOQQU_________________________________________________________________
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     |OOOOOOOPPQQRRUUUUUV
     |NOOOOOPPPPPQQQRRRSSUUUUVV
     |NOOPPPPPPQQQQRRRRRSSSUUUUUVV
305.0|NNNOPPPPPQQQRRRRRRRRSSSSSSUUUUVVVVW______________________________________
     |ANNNNOOOPPPPPPPQQQQQRRRRRRRSSSSSSUVVVVVWW
     |AAAANNNNOOOPPPPPQQQQQRRRRRRSSSSSSSUUVVVVWW
     |AAAANNNOPPQQQQRRRRRSSSSSSUVVVWWWWW
     |AAAAABNNOPPPPQRRRRRSSUUVVVWWWW
295.0|AAAAAABNNPPPQRRRRRSUVVVVWWWWW____________________________________________
     |AAAAABJNNPPQRRRRSUVVVWWWWW
     |AAABJNNPRRSTTTUVW
     |AAABJJNNRRSTTTTUWW[
     |ABJJJNNRRTTTTTWW[
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255.0|DDDDDDEFFFFGGGGGGGGHHMMMM________________________________________________
     |DDDDDDDDEEEFFFFGGGGGGGHHHHHMM
     |CDDDDDDDEEEEEEEFFFFFGGGGHHHHHHHM
     |CCCCCCDDDDDEEEEEEEFFFFFFGGHHHHHHM
     |CCCCCCCDDEEEEEFFFFFGGHH
245.0|BBCCCCEEEFFF_____________________________________________________________
     |BBBBBCCCCCEEEFF
     |BBBCCEEEEEFF
     |BCCEEEEF
     |BBBEEF
235.0|BBBBEE___________________________________________________________________
     |BBBE
     |B
     |B
     |
225.0|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO=-0.476
                                 1 1 1 1 1 1                          
       4 4 5 5 6 6 7 7 8 8 8 9 9 0 0 1 1 2 2 1 1 2 2 3 3 4           4
       1 2 0 2 0 1 0 1 0 1 2 1 2 1 2 0 2 0 2 0 2 0 2 0 2 0           0
       0 3 7 1 5 9 3 8 1 5 9 3 7 1 5 8 3 7 1 8 2 5 0 6 0 3           4


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 4/04 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                   OK9     May Oats

                      High Price:  315
                   Current Price:  289
                       Low Price:  275

                            Risk:  0.095
                     Opportunity:  0.176

                    (O/R) Ratio =  1.857


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis - 1
Parabolic Chart + 1
Nirvana Chart - 1
News - 1
Point & Figure + 1
Cyclicals + 1
Seasonals - 1
Internal System 1 + 1
Internal System 2 0
Third System + 1
Historic Range 0
Commitment of Traders + 1
Range/Volatility + 1
Level Table - 1
Other Factors 0
Total + 2
Place 19 May Oats on a Buy Watch with stoploss @ -15 -1/4 below the get-in point when recent price is represented as "151.52".
____________________________________________________________________________________________________________________________________________W.G.