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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Knighty Tin who wrote (7696)	6/9/2004 11:38:50 AM
From: mishedlo	Read Replies (3) of 116555

KT - You follow coffee? db.riskwaters.com "But the participation of “ignorant” thematic traders with the attitude that 'commodities are good' has suspended normal market trends, Touradji says. “It creates opportunities to trade directionally and fundamentally, but that comes with the risk that market dislocations are being driven wider than they have at any time in recent history.” Such activity occurred in April and May, as fears that the Federal Reserve planned an imminent rise in interest rates resulted in participants fleeing from some metals and soft commodities. Zinc has dropped 10% since its high in April, while coffee has fallen 15%. Touradji says he sold on the way down for risk control, but is now going longer, believing the fundamentals are bullish. Momentum traders of coffee on the London International Financial Futures and Options Exhange have a short position of over a third of open interest, according to his estimates – a “quite alarming” fact, he says. “When the market turns, they will not only have to cover this position, but will likely go long.” He predicts the price of coffee will double in the next year, calling the situation the most exciting opportunity he has seen in five years. “The risk-reward is great, because everyone is short,” he adds."

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