Commodities Bull Market... Coming to an End?

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[quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>


Looks like we have our resident commodities bear right here in you, usc. A drop in commodities could very well aid our hurting economy. I think the really interesting part of the market right now for me is the absolutely crazy volatility, just look at the week's numbers. I'm not really sure anyone can figure out where we are going from here.
 
[quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>


This does seem to be the overwhelming consensus on the television financial shows.
 
Tar sands are profitable with oil at $65/barrel. The mere threat of opening up new exploration whether on the shelf or in ANWR has an immediate impact on prices (as long as the threat is credible).



The dollar is not nearly as overvalued as some would like you to believe. The EURO is most the overvalued currency on the planet. Trichet's blind devotion to inflation targeting is leading the Continent down the path to a nasty recession. Spain is done for the next decade, and Italy isn't far behind. German real wages have been dropping since the turn of the century, Hungary is overextended, and France is still wrestling with the concept of the working week. The value of the Dollar against the Euro has been a driving story in the commodities markets. As the Euro/Eurozone continues it slide, I full expect commodities markets to reflect the "stronger" dollar.



The 20-year commodities supercycle argument (from Goldman most notably), is predicated on inbalances in supply and demand over the long-term. Wheat, Corn, and Soybeans production can all be changed within short-term horizon. Supply arguments are far more relevant in infrastructure intensive commodities (energy, mining) than the softs and the tropicals. However, the demand side of the equation can also be altered in the short term, and it is.



Oil consumption in the US is down down for the first time in 27 years. With both the U.S. and the Eurozone headed for recession, demand should continue to slacken.



The best cure for high commodities price is high commodities prices. And they were pretty damn high.
 
[quote author="Trooper" date=1218256477]usc = Cramer ?</blockquote>


Not sure what the question was, but my reference was to USCTrojanman
 
I've certainly grown weary about the recent developments with commodities and gold these past few weeks.



Inflation-theories aside, I was mainly interested in these for their supposedly low-correlation with equity markets in which I am heavily invested (on the bearish side). But everything seems to now be extremey correlated with everything else, and had I shorted some stocks it seems the end result would have been the same.



This is the second time I've seen gold and commodities get kicked in the head on a market rally - it happened back in March as well. Oil has never been tightly correlated with equities before, but now everybody seems to think they're mirror opposites, and oil going down is bringing the entire commodity complex down, including gold.



And now to compound things the dollar is starting to perk up.



It's as if the entire market is just a giant on/off switch where either absolutely everything pro-economy (stocks, esp. financials) goes up or everything pro-recession goes up (oil, commodities, gold) all at once. Dollar going up actually doesn't sound necessarily good for the economy... but it sure seems to be making people "feel good".
 
[quote author="muzie" date=1218268363]



And now to compound things the dollar is starting to perk up.



</blockquote>


There's your trade right there.
 
James Sinclair on the dollar and commodities markets last Thursday and Friday:




/




It is time to regroup, recognizing that nothing has changed. What we saw today in the seven trillion dollar a day global marketplace were hedge funds, black boxes and terrified longs all heading through the same door at the exact same time.



The door is big enough but can seem awfully narrow when panicked participants head for the exits at the same time. Like the entrance way to a good rock concert, however, the traffic can be equally as heavy in both directions.



Fear is an anomaly to witness. It appears as a stampede, with people kicking and shoving to get out of the same burning building. The awful truth is that there really was no fire - although perception is often worse than reality.



Ask yourself the following questions:



1. Are US banks more trustworthy today than they were on Monday?



2. Are you aware of a new problem called Auction Rate Bonds which are estimated at between $400 to $500 Billion? The Fed will have to pony this money up as the problem is focused on just those institutions that are already at the Fed Begging Bowl window. Logically, if they are borrowing to retain wiggling room, it is simple logic to understand the new problem is very much the Fed?s problem, which in turn is another problem for your kids to bear.



3. Do you really believe that because technicals are presently supporting the dollar it will regain its prior position as the universal Reserve Currency of choice?



4. Do you really believe that your retirement funds will regain the value that has been stripped away by all forms of Securitized Investment Vehicles?



5. Do you really believe that there is such a thing as global demand destruction in the energy sector as Asia keeps ticking at high economic levels?



6. Do you really believe that after the Olympics are over that China will collapse?



7. Do you really believe that Europe's economic situation will be more severe that the USA's? Have you noted that the USA had a rather good head start towards a severe recession?



8. Do you really believe that any currency is a better storehouse of value than gold?



9. Do you really believe that all the OTC derivative problems are now behind us?



10. Do you really believe that the credit market is loosening up enough to benefit credit-starved businesses?



11. Do you really believe that the public entities whose entire business involves insuring the value of debt instruments can really make good as bankruptcies increase?



12. Do you really believe that present inflation is demand driven?



13. Do you not know that the price increases now being witnessed are a product of monetary inflation for which increased interest rates render no effect?



14. Do you not know that the ECB?s action of leaving rates unchanged favors the euro over the dollar?



15. Do you really believe that the next move of rates in the US is up?



16. Do you really believe that all those central banks seeking to diversify out of the US dollar have changed their minds?



17. Do you feel certain that Israel will permit Iran to reach that point where a push of a button can incinerate its citizens?



18. Are you sure that Pakistan holds no challenge to life as we know it on this planet?



If the answer to all the above is yes then buy some cheap financials, sell all your non-dollar currencies and go long the good old greenback.



If you do not accept all the above as reality then be calm. As long as you are not on margin you have no problem.

Today was made difficult through the din of fear and the bullying of hedge fund fiends.
 
[quote author="tmare" date=1218238605][quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>


Looks like we have our resident commodities bear right here in you, usc. A drop in commodities could very well aid our hurting economy. I think the really interesting part of the market right now for me is the absolutely crazy volatility, just look at the week's numbers. I'm not really sure anyone can figure out where we are going from here.</blockquote>
I'm not really a bull or bear when it comes to commodities because I wouldn't trade them if my life depended upon them. That being said, it's pretty clear that by looking at the technical analysis of the charts commodoties are heading in a downward slope in the near term. Also, if the global economy is slowing down it also makes sense that commodities are taking a step down.
 
[quote author="Trooper" date=1218256477]usc = Cramer ?</blockquote>
haha...I don't listen to that blow hard, he's all hype and no substance. I don't buy the rally in the stock market like he does. I'm actually beginning to short some financials (C, ZION, WB, FNM, etc).
 
Jim pwns. Strictly for entertainment value. I started watching CNBC again because they had in cabin on a cruise I took. I can't watch him all the time, and I'd rather watch Fast Money with that sexpot Karen Finerman.



(That's a joke. I don't think Karen is a sexpot, but she is rich, smarter than me, and I'm a little jealous)
 
<img src="http://media.cnbc.com/i/CNBC/Sections/CNBC_TV/CNBC_US/Shows/FastMoney/Common/FM_a_karen_finerman_lg_new.gif" alt="" />



<a href="http://www.cnbc.com/id/20596071/site/14081545/">What ? No MBA ?</a>
 
[quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>
Interesting, I was only off by about $10. I still think we see oil below $100 in the next few months.
 
[quote author="usctrojanman29" date=1220852928][quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>
Interesting, I was only off by about $10. I still think we see oil below $100 in the next few months.</blockquote>


Maybe you have chosen the wrong career and you should actually be a trader.
 
[quote author="awgee" date=1220857648][quote author="usctrojanman29" date=1220852928][quote author="usctrojanman29" date=1218229351]Oil, gold, metals, and most other commodities are getting kicked in the teeth today. The way oil prices are going, we may be at $100 by Labor Day. Looks like inflation fears are decreasing.</blockquote>
Interesting, I was only off by about $10. I still think we see oil below $100 in the next few months.</blockquote>


Maybe you have chosen the wrong career and you should actually be a trader.</blockquote>
Nah, I just got lucky and I'll stick to my day job. haha
 
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