Three Bullish Areas in a Questionable Market

One currency that has been in a basing action and looks ready to move higher is the Canadian dollar. It has been trading sideways over the last seven months, and may be ready to break above the $102.50 resistance level. Canada has a tremendous amount of resources and that should be a factor in its economy and currency in the long term.

Rydex CurrencyShares Canadian Dollar Trust ETF

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Source: TC2000

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I have stated before that the skyrocketing price of grains will put pressure on cattle and hog farmers. That is because they must pay the increasing costs of grains to feed their livestock. That has started to force these farmers to slaughter their beef and pigs to cut down on expenses.

The main problem that will surface is that they are not replacing their livestock, and that will eventually lead to a supply/demand problem in the livestock market that will quickly escalate the price of meat to consumers.

iPath Dow Jones Livestock Total Return Subindex

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Source: TC2000

You can see from the chart of iPath Dow Jones Livestock Total Return Subindex (COW) that since October, price proceeded to drop until it found a bottom in April. Currently, it is right up against the resistance level created in January. The volume patterns and institutional money stream have begun to turn very positive and could be signaling that the index is ready to move higher.

Watch for a solid break above $45 on increasing volume. If the price breaks back down below $43 it may need more time to consolidate, but it looks like it is heading higher at this point.

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Everyone knows about the major earthquake that China recently experienced. The disaster destroyed a massive amount of infrastructure that will have to be rebuilt. Even though the government is trying to control the expansion and building to slow inflation, they will not be able to prevent the rebuilding that will be needed to repair the damage that has been done.

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At time of publication, Manning had no positions in the stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.