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Is the Bloodbath in Commodities Coming to an End?

by: Matthew Bradbard September 14, 2008 | about stocks: DBC / GSG / RJA    

Matthew Bradbard

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The bears are out of hibernation as we saw all asset classes including commodities have been hit hard in the last few months.

The CCI index which is comprised of 17 different commodities (cocoa, coffee, sugar, cotton, copper, platinum, silver, crude oil, corn, natural gas, wheat, soybeans, live cattle, lean hogs, heating oil, gold, and orange juice) is down 25% from its record high back in the first week of July.

This is staggering, because of the leverage in commodities this move translates to a much broader move. To me this has been a blessing, not in the short term because it has been painful for many commodity investors including some of my clients, but what this correction has allowed is an entry to get long in a secular bull market.

The way I look at it is prices overshot on the upside and have now overshot on the downside. I don’t know where the bottom will be, but we have started to test the waters again on the long side.

What I do know is that it’s against the tide and that is reassuring because when everyone felt commodities could only go higher look at what happened.

Please view accompanied chart and notice that the 90 week moving average has served as solid support since the run higher in commodities began almost 7 years ago.

click to enlarge image

Risk Disclosure: 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. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.

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This article has 2 comments:

  •  
    Sep 14 08:25 AM
    Your quetion: Is the Bloodbath in Commodities Coming to an End?

    My Answer: Is the Election over with yet?
    Reply
  •  
    Sep 16 08:13 AM
    yes, Of course trend has reversed. Whereas Crude oil and base metals are concerned they havent touched the bottom yet; we can expect price to fall further as fundamentals are weak.
    Reply
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