From Wallaces Farmer:
Massive fund liquidation sent prices sharply lower across a broad spectrum of commodities today, from grain to energy to precious metals. A sharply higher dollar spurred active profit taking after the Dow hit new all-time highs on Monday, despite ongoing weakness showing up in much of the economic data.
Traders fear a bearish surprise in employment data expected later this week, which could find the market vulnerable. That led to early profit taking. In summary, there are fundamental supply and demand reasons for the grain and oilseed markets to be weaker in early October, and this year is no exception.
However, today's collapse had more to do with the flow of Wall Street money out of the commodity markets, although a malfunction in its order routing system may have aggravated problems. We saw a similar collapse in July, leading soybeans to drop 94 cents in three sessions. It took several weeks for the market to recover from that episode, with soybeans losing another 50 cents over the next month, before rallying $2 in the following six weeks.
Look for market bulls to be rather cautious in the days ahead, leaving us vulnerable to a larger correction before the long-term fundamentals regain control once again. In the mean time, this price break is a gift for end users, which should help shore up demand long-term, just as it did in July, leading to the late summer rally.>>>MORE