102
LEAN HOGS FATTEN UP
BEFORE THANKSGIVING
Demand for pork increases, as consumers switch
meat products when beef prices are too high. In
addition, Canadian imports have started to fall off,
and now we begin a cycle of demand outpacing
inventories.
Seasonally, we have a low posted in the hog
market in November, so traders should look to buy
lean hogs on or about November 2 and exit on or
about November 21. In the last 41 years, this trade
has provided 27 years of gains, for a success rate
of 65.9%. The cumulative profit is $14,050. Again,
using some simple timing techniques should have
had you entering this trade a bit later in November
2009 and exiting after Thanksgiving at much more
favorable prices.
The chart below is of Hormel Foods (HRL),
overlaid on the lean hogs front-month futures
contract to illustrate the correlation in the price
action. This company is in the business of pro -
essing pork and producing hogs, both here in the
United States and abroad.
As you can see, Hormel has a strong cor -
relation to the price of hog futures. The price
move of HRL and lean hog futures in 2009–2010
is rather similar to the historical seasonal price
pattern of lean hogs, shown in the bottom line
on the chart. Another company traders can follow
based on hog price moves is Smithfield Foods
(SFD), a pork product producer. These two stocks
frequently move in tandem with hogs. See pages
133–138 for additional correlated tra
des and page
179 for more hog seasonalities.
Chart courtesy TradeNavigator.com
LEAN HOGS (LH) BARS AND HORMEL FOODS (HRL) CLOSES
(WEEKLY DATA JANUARY 2009–MAY 2010)
ENTRY EXIT PROFIT/
YEAR DATE CLOSE DATE CLOSE LOSS
1969 11/4 25.550 11/21 27.050 $600
1970 11/4 17.000 11/23 17.250 100
1971 11/2 22.175 11/19 23.425 500
1972 11/2 29.350 11/22 29.200
–60
1973 11/2 46.075 11/21 48.750 1,070
1974 11/4 43.650 11/22 44.075 170
1975 11/4 50.450 11/21 53.225 1,110
1976 11/3 29.925 11/22 33.300 1,350
1977 11/2 36.875 11/21 38.350 590
1978 11/2 49.400 11/22 53.700 1,720
1979 11/2 40.800 11/21 45.250 1,780
1980 11/5 55.575 11/24 55.450
–50
1981 11/3 49.000 11/20 46.300 –1,080
1982 11/2 53.825 11/19 56.750 1,170
1983 11/2 46.700 11/21 46.175
210
1984 11/2 51.000 11/21 53.475 990
1985 11/4 46.125 11/21 46.300 70
1986 11/4 48.625 11/21 51.425 1,120
1987 11/3 41.275 11/20 43.750 990
1988 11/2 45.825 11/21 42.625
–1,280
1989 11/2 46.625 11/21 50.625 1,600
1990 11/2 50.050 11/21 51.725 670
1991 11/4 42.175 11/21 42.750 230
1992 11/3 42.925 11/20 44.225 520
1993 11/2 49.875 11/19 47.425
980
1994 11/2 36.800 11/21 34.950 –740
1995 11/2 46.200 11/21 46.950 300
1996 11/4 75.950 11/21 76.275 130
1997 11/4 62.825 11/21 61.775
420
1998 11/3 42.625 11/20 36.650 2,390
1999 11/2 49.700 11/19 54.925 2,090
2000 11/2 53.700 11/21 56.850 1,260
2001 11/2 54.700 11/21 53.600
440
2002 11/4 50.450 11/21 52.750 920
2003 11/4 58.550 11/21 54.075
–1,790
2004 11/2 69.725 11/19 73.400 1,470
2005 11/2 65.925 11/21 64.625
520
2006 11/2 67.800 11/21 66.550 500
2007 11/2 59.875 11/21 62.750 1,150
2008 11/4 61.850 11/21 64.100 900
2009 11/3 64.525 11/20 64.375
–60
41-Year Gain $14,050
NOVEMBER LONG LEAN HOGS (FEBRUARY)
TRADING DAY: 2—HOLD: 13 DAYS
Lean Hogs Seasonal Pattern since 1968
c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 102
MONDAY
7
TUESDAY
8
WEDNESDAY
9
THURSDAY
10
FRIDAY
11
SATURDAY
12
SUNDAY
13
OE:
KC(Z)
The principles of successful stock speculation are based on the supposition that people
will continue in the future to make the mistakes that they have made in the past.
Thomas F. Woodlock, (Wall Street Journal editor and columnist, quoted in
Reminiscences of a Stock Operator, 1866–1945)
I know nothing grander, better exercise…more positive proof of the past,
the triumphant result of faith in humankind, than a well-contested national election.
— Walt Whitman (American poet, 1819–1892)
People who can take a risk, who believe in themselves enough to walk away
[from a company] are generally people who bring about change.
— Cynthia Danaher (Exiting GM of Hewlett-Packard’s Medical Products Group, Newsweek)
Excellent firms don’t believe in excellence— only in constant improvement and constant change.
Tom Peters (In Search of Excellence)
I’m not better than the next trader, just quicker at admitting my mistakes and moving on to the next opportunity.
— George Soros (Financier, philanthropist, political activist, author, and philosopher, b. 1930)
End Short Gold(Z) (Oct. 4)
End Long Soybeans(F) (Oct. 24)
Veteransʼ Day
NOVEMBER
c01_CTA_2011_pgs_12-119_c01_cta_2011_pgs_12-119 7/21/10 2:03 PM Page 103

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