Wednesday, September 22, 2010

Five of Ten Commodities Bespoke Follows are Two Standard Deviations (or more) Above their 50-Day Moving Averages!

The move in gold is starting to resemble that of oil in 2008.
From our June 2, 2009 post "Markets: What Happened to the Bears?":

...After talking to some folks who had been mauled [cute -ed] I decided that the short-sellers had just given up. It is no fun to be selling into the buying of Goldman and their long-only index clients, CalPERS, the universiy endowments et al.

So they said to hell with it. Oil continued to rise for another 33 days before peaking on July 9.
On July 29 I had this comment at Environmental Capital:

...As best as I’ve can tell approx. 40% of the move from $80 to $147 (25-28 bucks) came from “speculation”. I use quote marks because of the terminology problems most of the talking heads have when the subject is commodities. Speculators in commodity parlance take the other side of a hedgers trade, thus performing a societal good.

The problem was, until last week, the shorts had been beaten up so bad by the relentless flow of “investor” money that they were out of the game. The $10.75 uptick on June 6 was their capitulation.
They covered and said screw it.
I personally don’t see any reason to allow the “investors” in markets for consumables. If they want an inflation hedge, let them run gold to a bazillion per ounce....
It looks like I may have gotten my wish.
What happens when a move is as relentless as the recent move in gold is the shorts quit playing. Then when the market breaks there is no short-covering and the drops can get pretty exciting.
Here's the headline story from Bespoke Investment Group:
...Aside from oil and natural gas, every commodity shown is either at or above the top of its trading range.  As shown, gold's recent move has pushed it outside of its range.  Moves to similar levels over the last year have been met with pullbacks.  Silver and platinum are also just above the top of their trading ranges as well.  And if you thought the metals were overbought, check out the charts of corn and orange juice!

Here are the rest of the charts and some more commentary.