Tuesday, November 16, 2010

One More For The Road

A final thought for this evening...

I took some time tonight to review the charts of several of my favorite commodities and I found that they all have something in common.
After reviewing gold, silver, wheat, soybeans and crude, I found them all to about 1-2% away from what would be looked-back-upon as very logical bottoms. I find this quite interesting from a correlation standpoint.
We've all observed the PMs getting smoked for the past week.  No doubt we've seen the entire commodity sector get smacked around pretty good. But would you have thought their charts looked so similar, not only on the upside the past six weeks but back down this past week, as well?
This draws me to a conclusion in which I am quite comfortable. What we have seen in the past week is a wholesale selloff of risk assets. Nothing more. The five commodities listed above are related only to the extent that they are dollar-denominated. For example, wheat has an entirely different set of fundos than gold but the wheat chart is almost identical in terms of percentage move.
As this relates to the PMs, it is further proof that we are simply seeing a price correction. Not a top. Not a new paradigm. Not a Wave 1 of Bear 1 of...blah, blah, blah Elliott nonsense.
Gold will probably test today's lows and may even see 1320 but I am supremely confident that that is as far down as it will go.
Silver will test 25 again but no way it goes much below 24.75 before rebounding sharply.
Crude's gonna find a ton of support between 80 and 82.
Wheat may see $6. If it does, holy cow! The chance of a lifetime to buy. Very tight global stocks and a long, cold winter guarantee it won't go any lower.
Beans between 1160-75 are a steal.
My point, again, is that all these commodities are within the same % of very substantial support.
The change in sentiment that has caused this correction is very near the point where it will flip back.
Keep the faith. Buy this final dip. Much fun lies ahead.


  1. Silver bounced hard off of 25 today. It would be nice to see it bounce hard again tomorrow. I've noticed you keep lowering your thresholds as it goes lower ;)

    What do you think about this piece from Stewart Thomson about the relationship between the bond markets and gold? He believes there's going to be a lot of money flowing into the gold market as a result of the bond market collapsing.


  2. Hi, John.
    That's a solid, lengthy discussion. Stewart spells out many of the points Jim Sinclair has made for years with his "Five Golden Pillars".
    Yes, the ultimate bond market collapse will portend higher gold prices not lower, as the higher rates implied by the collapsing bond market signal the final funding crisis of the US government. In the past, higher rates signaled an inflation-fighting Fed but not this time.
    Now, whether this current move in the long bond signals the ultimate failure and end of the 28-year bull market remains to be seen. My guess is that the old bull still has some Fed-induced life support left in it. For a little while longer, at least.
    Thanks! TF

  3. Hi, Turd. Do you have any recommendations for wheat, soybeans and crude stocks? I'd like to get into these commodities, but I'm not sure which stocks to get.

    Thanks for the blog posts. I really enjoy your thoughts.

  4. Dan: One ETF you might consider is the GCC. It tracks the Continuous Commodity Index, which is a basket of all commodities. If you really want some bang for your buck, however, you can open an options account at a firm like Lind-Waldock for as little as a few thousand dollars. You'll most likely get your arse kicked but you'll have a heck of a lot of fun doing it.
    I opened my first commodity options account when I was just 21. Made a lot then lost it all. Been hooked since.

  5. Thanks, Turd. I'm really new at this myself, but zerohedge and your insights have taught me a lot. Thanks!