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HORTON MARKET LETTER

Market Analysis
Using Cycles And Seasonals

(September 3, 2010) LIVE CATTLE: The big outside week in this cattle weekly chart is the switch from October futures to December futures. This move to higher highs by December futures comes in week 12 of the current cycle and I do expect that this week or next week during "deadly week 13" should top out this move. And this cycle top could be very important, as I am showing the break from the 2008 high at 11205 to the 2009 low at 7997, and this was done in a clean 5 waves down. That means that all of this sideways to higher action since then has been a series of 3 wave moves, corrective, and it can be counted up to this week as an ABC-X-ABC. So we might be at a very important juncture and while I can count this move to the 10200-10300 area we will look for lower weekly lows now to confirm the cycle peak here and usher in the forecasts for lower prices into late October-early November for the next 21-week cycle low. That would turn the weekly oscillator down and setup a good 2 month decline both cyclically and seasonally. Hedgers are long puts against October, December, and February futures and because our put recommendation for October and December were made nearer the lows this summer I recommend those puts be rolled up next week to nearer the money.

Live Cattle

Source: DTN Prophet X

This is the active daily chart that just switched to December today (9/01) and that "jump" starts the ending 5th wave of C process. It may turn down right away or continue to 10200+ before it tops out, but by mid September this market should be headed lower. The confirmed bearish divergence on the daily chart tells us a top is near in live cattle futures. Any questions about this please contact me.

Bottom Line--Bearish now!

Live Cattle (December Daily)

Source: DTN Prophet X


FEEDER CATTLE: The weekly chart shows from the 12/2008 lows at 8410 what is either a big 3 or 5 wave move up to last week's high. This rally has so far fallen short of the both the 2008 and 2007 highs but until we see a clean close under that 11-week moving average near 11400 it could still get there. But the current top is in week 13 and this week's break has overlapped a previous peak so with the weekly oscillator turning down under bearish divergence I do believe we are at a cycle peak in feeders. Look lower cyclically and seasonally.

Feeder Cattle

Source: DTN Prophet X


My wave count of what is yet another 3 wave pattern in feeders and I need to see a close under that moving average structure around 11420 and further decline below that Key area of 11117 to point lower into October. This C wave break could carry to the 10700- 10400 area confirmed with declining oscillators. Hedgers are long puts and short calls.

Bottom Line--Bearish.

Feeder Cattle (October Daily)

Source: DTN Prophet X


LEAN HOGS: Weekly oscillators in hogs are oversold but cycle lows are not due until October- November. We may see a quick rally to the 11-week MA and green cycle peak trend line near 7670- 8200 and that would alleviate that oversold, but rallies should fail and the downtrend should persist cyclically and seasonally into October- November. Key for shorts is above 8510, use stops.

Bottom Line--Bearish.

Lean Hogs

Source: DTN Prophet X

CORN: This is the long view of corn from the 2008 high at 779 to the 2009 low at 302 there is a clean 5 waves down. That low in 9/2009 will be either big wave 1 or A and all of this sideways to higher action since then will be big wave 2 or B. That means that once this rally is finished, and it may be soon or not until next year, then the 2009 lows will be taken out by big wave 3 or C. The weekly oscillator is very overbought but has not turned down yet and this cycle is only finishing week 9 this week, so I still expect to see more upside to that 485 level for this cycle top in September.

Corn

Source: DTN Prophet X

I am counting this current rally as a probable ABC from the 343.25 cycle low in late June and as mentioned it may not top until later this month. I can count this to 460- 470 but it may extend up to that first retracement on the weekly chart near 485. Key for this upmove is that 376 low but coming below those moving averages from 433- 409 is negative and will confirm a top.

Bottom Line--Bullish.

Corn (December Daily)

Source: DTN Prophet X

KC WHEAT: Like corn I see 5 clean waves down from the 2008 high at 1395 to the 2009 low at 464.5. This is big wave 1 or A and the current rally will finish off big wave 2 or B, or it may end at higher prices next year. It is also possible that the week 8 high is the cycle peak, but I am still looking higher right now. Next cycle low is due in November.

Bottom Line--Bullish.

KC Wheat

Source: DTN Prophet X

SOYBEANS: For what should be an extended cycle the bean market is having a difficult time taking out that week 8 high at 1054.5, and now the weekly oscillator is turning down. I still believe that after back to back contracted cycles that soy is due for an extended cycle and as such the cycle peak should probably come in weeks 13- 16, not 8. But considering that the seasonal pattern should be weaker into October and that week 8 high in early August could be the seasonal peak and also cycle peak. For that reason we will officially tell growers to roll puts up from the first recommendation in early Mar near 930 to above 1000 now.

Soybeans

Source: DTN Prophet X

This same wave count where we have either seen the 4th wave low at 993.5 or there will be one more break to 980- 960 before the market turns up for wave 5 this month. This count is invalid if prices drop into the wave 1- 2 zone of 947- 894, that confirms a top.

Bottom Line--Neutral.

Soybeans (November Daily)

Source: DTN Prophet X


COTTON: Cotton did take out that previous cycle peak at 8710 so that revises our cycle count to show the July low at 7296 as the new 21-week cycle low in week 24 and 47 overall. That makes the move down from 8710 a 3 wave break and the rally to this weeks high at 8771 could be the new cycle peak in week 6. If so we will see prices below that gold trend line near 7430. Look higher still first.

Bottom Line--Neutral now.

Cotton

Source: DTN Prophet X

U.S. DOLLAR INDEX: The dollar is finding resistance around the 11-week moving average near 8340 this week but with the weekly oscillator turning up prices are not backing off from this level either. With this current cycle only finishing week 4 this week I believe the buck is pausing before moving higher and a correction of that big kickoff move from the cycle low at 8074.5 is to be expected. Look for this correction to end soon and continue the rally into October for the next cycle peak.

U.S. Dollar Index

Source: DTN Prophet X

The wave count shows the recent cycle low at 8017 in early August to be wave 2 and the rally from there to 8363.5 is small wave 1. The sideways action from there is part of small wave 2 that should bottom around 8200 and start back up again in a wave 3 of 3. The key area for longs is that recent cycle low, below that raises questions about my wave count so we will use that for stops.

Bottom Line--Bullish.

U.S. Dollar (September Daily)

Source: DTN Prophet X

GOLD: The rally over that 1213 - 1219 area locked in that break to 3 waves and the continued rally in gold makes that recent low at 1155.6 the new 21-week cycle low in week 25 and 68. This keeps the uptrend intact with higher cycle lows and highs so we now expect to see gold exceed the last cycle peak at 1265.7 and target 1300 for the next peak. Below the July cycle low is bearish and this cycle should be short, 16- 18 weeks.

Bottom Line--Neutral now.

Gold

Source: DTN Prophet X

U.S. TREASURY BONDS: Long view showing the 2008 high at 141-27.5 and the 2009 low at 111-22. That break looks impulsive to me and everything else from that low is overlapping, or corrective. So the current cycle rally topped last week in week 20 of what should be a long 26- 28 week cycle that will bottom in October. I am expecting this move to turn down at anytime and start that next leg down and the retraces of 135-11 to 138-16 should hold that top.

Bottom Line--Neutral.

U.S. Treasury Bonds

Source: DTN Prophet X

RBOB GASOLINE: Bear cycle pattern with lower cycle lows and peaks so I am still looking lower contraseasonally into October for the next 21-week cycle low. The key area that changes that forecast is the recent week 4 high at 2.1853 above that is bullish. But I see nothing yet to indicate anything other than lower prices so I still expect to see gasoline in the 1.50 area this fall.

Bottom Line--Bearish.

RBOB Gasoline

Source: DTN Prophet X

CRUDE OIL: Same setup here with bear cycle pattern forecasting lower prices into the fall which is very contraseasonal. But with lower cycle highs and lows and prices failing at the 11-week moving average near 7680 we are expecting lower prices into October- November for the next 21-week cycle low. The key area for stops is that week 10 high at 8340 and above the green downtrend line near 8155 is friendly.

Bottom Line--Bearish.

Crude Oil

Source: DTN Prophet X


S&P 500: Here is the long view of the S&P from the Mar 2009 lows (wave A) to the April 2010 highs (wave B). That April high marked a cycle peak and the ensuing 21-week cycle low in late May was lower than the previous cycle low in Feb 2010. That is the first nail in changing the cycle pattern and when the sideways rally topped out in August in week 11 that was the second nail with a lower cycle peak confirmed when prices closed cleanly below the 11-week moving average last week. Prices are now finishing week 14 this week and that leaves 6- 8 weeks down of what should be a normal cycle, bottoming in mid to late October. This is expected to be a normal cycle since the most recent cycle low in May came in week 64 from the March 2009 lows, almost perfect in timing. The weekly oscillator has turned down after correcting its oversold condition and is setup to follow prices lower into the fall. The final nail in this developing bear cycle pattern will be prices trading below that irregular price low in late June at 1010, that would hasten the expected decline to next support in the 945- 880 zone. Traders have stops above the April highs at 1220 and taking out 1010- 1000 would cause us to lower that risk to above the summer highs. For now continue to look lower.

S&P 500

Source: DTN Prophet X

The wave count from those April highs shows big waves 1 and 2, and that from that wave 2 high at 1127.75 on 8/05 I can see a clean 5 waves down to 1037 on 8/25. We should be seeing an ABC up now to that moving average resistance from 1072-1093 to correct that break and it should be finished by mid to late next week. That correction should be followed by another impulse move down that will take prices below 1000- 950 by late September. The Key for stops on this count is above 1127.75.

Bottom Line--Bearish.

Mini S&P (September Daily)

Source: DTN Prophet X

September 3, 2010
Thomas M. Horton
Horton Market Letters
P.O. Box 892, Amarillo, Texas
888-435-1060
www.hortonadvisoryservices.com
hortonmarketletters@arn.net


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