Sort & Cull

Once again, market watchers are being reminded why they call them "futures."

A trading instrument called "yesterdays" or "nows" might be more deliberate, more vulnerable to common sense, less emotional and volatile. What fun would that be?

The defensive performance of the lean hog pit this week is the reason for my disgust (not surprise, just disgust). New spot August closed 127.07, 500 points below its contract high set on June 30, in a strange way victimized by the accuracy of its own bullish rhetoric.

For nearly half of year, bulls have been stoking the fire in the lean pit with dire prediction of PEDV death loss and severe shortage of commercial pork. But up until recently, hard evidence of chain speed sucking air seemed more than a little evasive.

Here's the crazy part. When federal meat inspectors at long last confirmed a gaping hole in production (e.g., hog slaughter over the last two weeks has averaged about 9% smaller than 2013), bullish specs took the dirty facts like a death in the family.

Yeah, I know: buy the rumor and sell the fact. That's how this game of twisted expectations works.

We spent the first half of the year championing bullish supply realities that would rush from the wings at any moment. Now, given the new crop of aggressively discounted deferred contracts, I suppose we'll spend the rest of 2014 nervously anticipating a resumption of full production and sinking price action.

Futures all seem to walk a thin line between expectations and confirming evidence. Market momentum is preserved by just the right tension.

But once the board gets bored, long-standing friends of the trend need to get out of the way.

For more of John's commentary, visit http://feelofthemarket.com/…

(AG)

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