The commodity crash is on - full steam ahead! Crude oil is taking it on the chin as the global outlook weakens and the dollar strengthens. Look for heating oil and RBOB to continue to fly south for the winter. Natural gas remains a buy on tightening inventories and a cyclical supply/demand shift.
Stocks collapsed last week amid the Fed’s treasury musical chairs and deepening crisis in the EU. Bottom line is the world is in a recession, growth is going to be nil, and impossible debt and government bankruptcies are here to stay. The dollar remains a safe haven, however, as investors flee the euro and the U.S. continues to make command decisions on monetary policy. The Canadian and Australian dollars are in a freefall and are strong shorts on bounces. The euro and pound should continue to experience selling but a long pound/short euro may be worth a look. The Japanese yen continues to be the beneficiary of investor currency flow out of the euro, Canadian and Aussie. This week offers the best shot since the latest intervention to see the yen breakout to the upside, but overall remains congestive near the highs. I continue to stand by my forecast that:
The Japanese Yen futures will hit 140 before it hits 80 or I will quit writing the Weekend Commodities Review...forever.
Grains are taking it on the chin as commodities traders and funds appear to be fleeing the grains as the realization of a global demand slowdown and strong U.S. dollar punish this inflated sector. Corn, beans and rice are strong sells, with wheat a value buy against corn on a spread basis only. The report on the 30th might just be the straw that breaks the grains backs here.
Cattle began what I believe is a long term descent with a retracement of 30% or more expected. Hogs are also bearish with the rest of the commodities out there.
Hello liquidation event! The world is panicking out of metals and the liquidation has just begun. The last bastion of profitable long investing is finally seeing a mass exodus and it doesn’t matter if investors are liquidating to free up margin for other commodity and stock losses or if it is just a plain ‘ol run for the exits. When gold and silver were finally going to top it wasn’t going to be an orderly selloff – its something just like this – a meltdown selloff that leaves longs holding a bag of coal instead golden coins of money protection. There is no inflation – no growth in the world and a strong dollar means metals need to give back their inflation hedging premium.
Coffee is in meltdown mode as specs realize Vietnam is flooding the world with coffee. Sub-$2 coffee here we come. Cotton is a potential put buy but overall this is still an avoidable market. Cocoa has broken key support and should see sub-2000 prices before the year is out. Sugar and OJ remain strong sells after coming off inflated highs without fundamental merit. They both could see massive retracements.
Head analyst for MoundReport
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