In our opinion, what is presently underway is a final blow-off to the upside in the prices of some commodities and many commodity-related equities. It's impossible for us to confidently predict how much further these moves will go before the inevitable downturn gets underway, although our guess is that major peaks will be in place before the end of March. What we can say with confidence is that the decline that follows the speculative blow-off will take back all gains achieved during the blow-off stage plus a lot more.
Think this is a good view, and yes it's close to mine now. Regarding his comments on grains, as you know I've been aggressively and patiently bullish on them. However, I'm rather disappointed with how this recent sharp rally has quickly used up all the spec shorts fuel. On 2/8 when this bull move kicked off, there was an astonishing 386,075 commercial long in the grain complex, and 178,513 in my fav corn. Corn spiked a quick twenty cents, and just when I was really starting to gloat over my commodity account, here we see that reduced all the way down to 34,034 in the grain complex. Commercials are still long 64,232 corn, and 23,329 soybeans.
So I'm afraid I may have to revise my view about the March 31 plantings being light. Commercials know more than me, so sometimes one has to just reluctantly adjust, even if it's not in sink at the moment with my larger rather Malthusian world view. I will likely look to sell most of my corn futures into overhead resistance: 2.23 and 2.29 on May corn. I may still maintain a small position into the planting release out of stubbornness, and in violation of "my corn doesn't know I own it" principle.
All this seems to point more and more to me, about some kind of problem coming out of Asia in March. I can even see the possibility of a perfect storm. The avian flu story was covered on national news last night, and you already know my Train Wreck theory. If we are in that blow off period now, that will kick in big time, and in a month or so, if not sooner, widespread global weakness will be the new theme. So the best move, might be some kind of shift out of commodities to even short China, and economically sensitive stocks. Again, that's hard to do in the blow-off phase. |
