Discussion in 'Trading' started by PohPoh, Nov 26, 2007.
Gold, crude, grains, softs...
The fact that many sectors such as tech, commodities, industrials are holding well is a very good sign. The heavy selling is concentrated to homebuilders, consumer stocks, and financials. The leading sectors are still doing well.
This market is setting up for a 5-7% one day drop. Will think of becoming bullish around 11250-11500.
TECH IS HOLDING UP? thats news to me,look at the naz.
Commodities are next, expect a big drop in commodities as well over the next 3 months.
Tech is still holding on, once tech goes the nasdaq is headed to 2200.
Don't worry they will go down like everything else.
Commodities are not correlated to the overall market at all. This is exactly why money managers put them in a portfolio - for diversification.
Strong commodities will help the commodity stocks, but says nothing about underlying strength broadly. Most commodities are sky high due to the ridiculous global liquidity situation, and the dollar, not because of supply and demand. Sure, global strength drives them to a certain extent, but not even close to what has actually happened in these markets. Pretty much every market pro will tell you this. Journalists, on the other hand, may say anything!
Try doing an overlay of the US Dollar Index and just about any of the major commodities. Speaks volumes.
I've actually been expecting this for quite some time. I'm definitely too early to the party, but the payoff could be astounding. When these babies drop, the floor falls out. I once had a buddy in lumber for 11 straight limit days. Unfortunately, he was on the wrong side!
Once Liquidity starts to dry up which is happening right now the prices of commodities are going to fall hard. With the economy slowing here and around the globe expect the prices of commodities to fall as well.
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