Are Commodities Topping Out
The market lost some momentum midday as the
indices could not hold onto morning gains. Volume was lower today as
traders sold worse than expected PPI news. Strangely, both stocks and the
dollar declined today.
Actually, many different assets are acting odd lately.
I have monitored oil this week, and expected crude to lead the charge
higher. Oil is actually in a great formation and it likes the $90
area. The longer it stays near that price, the more likely $99
becomes.
Of course we know it's all bs. Not
just oil either. All commodities, with the exception of soft assets,
which have a fundamental story behind them, although the 100% rally for a
few is probably excessive. That leaves the oils, coals, irons, and
coppers of the world. And how do we know this run is bs?
Well, look no further than the dry
bulk index.
When oil, iron, copper or coal are actually being
used for production, the commodities are shipped from point A to point B
in bulk shipments. With record high industrial commodity prices, one
would also expect a similar increase in shipping rates, which would be
tied to the increase in demand for shipping. However, bulk shipping rates
are at a decade low, and the lack of demand for shipping shows us these
goods are not heavily transported, which likely indicates they are not
being used traditionally.
While I remain a buyer at these levels our stop losses are ridiculously
tight. One stop, on GCI, was hit and it recorded a 17.5% gain in a month.
Today I pulled CCME off the portfolio for another 17% in less than a
week. While I remain bullish, now is not the time for speculation, to see
how we are preparing our portfolio for the next major move and take a
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