Is The Commodity Market Trend Really Your Friend?
The sun’s peeking by a clouds in a commodity space. In fact, some of a best trade opportunities we’ve seen in months are popping adult in line right now.
Today, we could burst on one of these opportunities for a lightning quick hit-and-run raid on a line market. It should measure us some good fat gains while no one else is looking.
Of course, many folks aren’t meddlesome in a commodity marketplace that’s constructed zero though waste over a past several years…
Take Greenlight Capital’s David Einhorn. He’s even started bashing commodities.
You remember Dave. He’s a billionaire account manager we followed into a Macy’s (NYSE:M) trade that’s humming along so well.
It hasn’t been easy for Einhorn. Greenlight mislaid some-more than 20% final year. Mainly given they were brief Netflix and Amazon—the tip dual bonds in a SP 500.
But as we pronounced progressing this year, we wouldn’t gamble opposite Einhorn in a prolonged run. And in 2016, it looks like he’s banishment on all cylinders. Heck, Macy’s is adult 20% on a year—and it’s usually February!
Back to his large call. Dave says a commodity supercycle is kaput. Finished. Over…
We already wrote a commodity market’s acknowledgment a integrate of years ago. But Einhorn’s going grave-robbing, digging adult a physique years after it croaked usually to infer that it is, indeed, diseased.
Gee, we consternation what gave him that idea…
The Bloomberg Commodity Index tells a story here. For a past 3 years this fool has left nowhere though down. It’s off by 50% given Mar 2013. Compare that to a 27% benefit in a SP 500 over a same period.
But don’t worry— there’s copiousness of room for Einhorn onboard a commodity genocide cruise. His play is simple: brief a complicated machine stocks. Again, this is a trend that’s been total for some time. The tellurian slack ain’t accurately a large tip anymore…
But here’s a thing Einhorn doesn’t mention:
The commodity supercyle competence be toast—but that doesn’t meant we won’t knowledge some furious bear marketplace rallies. In fact, some of a best trade opportunities we’ve seen in months are popping adult in commodities.
Despite all a terrible news these days, certain line are flashing clever “buy” signals right now. For example, everybody thinks line like iron ore are passed given of collapsing expansion in China. I’m certain we do, too.
But after a unpleasant decrease in 2015 iron ore prices are indeed rebounding. Bloomberg records that usually this week iron ore prices jumped above $50 for a initial time in 4 months…
“Iron ore has now climbed some-more than 17% this year and 35% from a Dec low, as Chinese steel mills have started to feed stocks,” a Financial Times reports. “The miscarry has wrongfooted many analysts and traders who approaching iron ore to sojourn during or next $40 a tonne for a foreseeable destiny given of abounding reserve and negligence direct from China, a world’s biggest steelmaker and consumer of iron ore.”
Will aloft prices last? I’m not so sure. But we do know we can strike while a iron ore is hot.
And remember gold? The steel is indeed relocating adult this year. The Market Vectors Gold Miner ETF (NYSE:GDX) is adult a towering 38% year-to-date. Yes, a bullion miners are substantially overextended during this point. But for a officious terrible year for bonds they’ve offering countless trade opportunities.
And a changed metals aren’t a usually diversion in town. Those lost bottom metals are starting to locate a bid. This marketplace is looking interesting…
Take Copper, for instance. Dr. Copper competence have died and left to steel sky after peaking approach behind in 2011. But that’s OK—we’ve connected him adult for a Weekend during Bernie’s. This remains can dance!
Copper is now adult scarcely 10% from a Jan lows. If you’ve been following along with a tale of Freeport-McMoRan (NYSE:FCX), we already know that this batch has usually about doubled from a late Jan lows. That’s simply besting a vital averages.
Bottom line: certain line are presenting some good short-term opportunities right now.
Commodities have found a patch of blue sky. we don’t know how prolonged it’ll stay open, so let’s bask in a fever while we can…
Courtesy: Greg Guenthner
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