In retrospect, the recent sharp declines in equity prices and significant pressure on industrial commodities were justified by disappointing US scheduled data and the Fed’s move to notch interest rates upward.
The spec and fund net long of 20 nonfinancial commodities has come down significantly in March (down roughly 650,000 contracts), but it remains at lofty levels.
This is a sample entry from Don DeBartolo’s email newsletter, Trade Spotlight: Spreads, published on Wednesday, October 5, 2016. There is a bear futures spread trade opportunity in the Unleaded Gasoline market on a Trend Line breakout today. Establishing a bearish position where a front month contract is sold and a deferred month contract is… Read more.
The early July COT spec and fund net long position reading in 20 non-financial commodities, combined with ongoing strength in the US Dollar and favorable US grain production weather, leaves the path of least resistance in most markets pointing to the downside.
Death and Pestilence off of Brexit has failed to surface so far!
The recent retrenchment in bean oil, crude oil, sugar, corn, equities, cattle, gold, platinum, palladium and copper as well as significant rallies in Treasuries and the Japanese yen mostly started around March 14th, and some have labeled the period since mid-March as a “crisis.”
Senior Broker Andrew Pawielski reviews CME’s Chief Economist Blu Putnam’s report that focuses on 8 factors that could drive the energy markets in 2016.
We won’t suggest that the recent lows in many commodities are solid, but value-hunt buying of copper assets by Carl Icahn, a $4.00 single-day rise in crude oil prices, and a 1,000-point, 2-day bounce in the Dow suggest that sentiment was overdone on a number of fronts.
While we think the bear case for the global economy is already overstated, more long liquidation selling in crude oil is possible.
An impressive January rally in gold, a shift from a spec and fund net short position to a net long in US Treasury Bonds and a dramatic downside extension in the Canadian Dollar on its monthly charts suggests that global economic sentiment is factoring in a fall back towards recession.