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    Wednesday, August 6, 2008

    The time is here

    Of course I cannot know for sure if this is the bottom in commodities, and or the top in stocks, but I'm comfortable taking a stand here. As I often discuss, almost all asset classes are linked. For the past couple years, the JPY (yen) and the $CRB have been reliable indicators. On top of that, we have everybody, even commodity bulls, trumpeting the "crash" in hard assets. I can't recall in the last 7 years when traders were so overwhelmingly bearish. I won't take a position on sentiment alone (too hard to quantify), but I've learned that the inital discomfort has coincided with the best entries. We also have stocks tiring a bit after a decent run. We've been waiting awhile, but finally things are falling into place, and offering confirmation.

    Here's what we can quantify. The yen has retraced to the 50% Fibonacci line, which is typically a good spot for long term bulls to enter. Readers know that the yen has traded inverse to US equities, so should a rally occur in yen, look for stocks to drop hard. It might take a few more days to materialize, but I suspect the recent weakness (today) is the last fakeout, before the bulls take the yen higher. In broader terms, look at the $USD. Sure, it's in no man's land, and there are many reasons the index could work higher (weak European economy, mainly), but the index sits right at the 200 MA. Even if the $USD works through this area, it will provide resistance, nonetheless.

    Combine the two points above, with the fact the $CRB is coming down to kiss the 200 MA just below today's level, and we have yet another catalyst. Honestly, anybody looking to short commodities here must have a death wish, and that leaves the longs like me in the room. I'm a buyer, even though I believe in the global slowdown! I might be wrong, but in the past this strategy has paid me well. Making me even more comfortable, is the fact I am the only person with this "variant" viewpoint. I am confident we are close to a turn, possibly even more than a short term move. I continue to look for areas to short equities (IYF, IYR, and indexes), and will continue accumulating commodities (Gold, Corn, Soybeans,etc).

    1 Comments:

    Blogger MB Wealth said...

    We could not agree more. Buy commodities that are beaten down: corn, orange juice, cotton, natural gas. Furthermore we feel the recent acceleration in livestock is the beginning of an historic move( see recent article
    http://www.mbwealth.com/articles/cows&pigs.pdf)
    The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results.

    August 6, 2008 5:43 PM  

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