Friday, November 7, 2014
If I were a short-term commodity trader....
If I were a short-term commodity trader having a ball shorting commodities right now, the following 4 charts would give me pause for concern:
I would be concerned that gold in CAD (or in an ex-US basket generally) has already broken through the lower Bollinger, yet gold has failed to break down ex-US. That would suggest that a "gold goes to $0" thesis is wrong, at least in the short term.
I would be concerned that copper has completely failed to break below $3. That would suggest that the "commodities enter a secular bear market" thesis is wrong, at least in the short term.
I would be concerned that steel has utterly failed to break down for 3 years now. That would suggest that the "China enters a secular bear market" thesis is wrong, at least in the short term.
And I would be quite concerned that oil made a larger drop in early October on increased volume, but has managed only a comparatively miniscule drop since October 13th despite much higher volume. That would suggest that the oil downmove has run out of steam, at least in the short term. When you increase volume in a downmove, the downmove is supposed to gather steam, not slow down.
A commodity secular bear market, if one develops, will take a decade to play out. It will not be over by Xmas.
I would also expect a commodity secular bear market to play out in cotton, grains, zinc and other honest commodities - not just the sexy crap that amateur basement hedge-fund clowns trade via ETFs.