Friday, March 1, 2013
There are new trends in this market. For the last several years, stocks, commodities and foreign currencies moved in step. Todd Harrison even has (had?) a saying that lower dollar is a condition for higher asset classes. I always had my doubts on that, because that makes zero trade in any other (more or less stable) currency.
Things changes since January 1. Stocks are up (a lot), dollar is stable (well, it went down and now it's back up), commodities are down, a lot. Interestingly enough, commodity sell-off started with commodities which are not on everybody's screen. Agro commodities, wheat and corn first of all, are down about 15% since January 1. Same goes for base metals. Oil was up, but this week it couldn't hold the ground. Gold just can't hold the line and crashed down trough 1600 line.
What does it mean? The obvious explanation: demand for commodities is down because of slow growth in the world and crisis in Europe. At the same time stocks are up because profits are up. I am not that sure. Commodity markets depend more on traders than on real supply and demand. I haven't seen any data on huge crop in the Southern Hemisphere to justify 15% drop in agros. Don't know about gold, its price is too dependent on demand from India and China. I think that traders got tired of commodities and are reducing their long positions.
Another trend: US 10 year debt hit 2% high and went down. I was wrong predicting 1% by the end of last year, but we still might get there. If budget is cut, we will definitely get there.
Current trends tell me to stay cautious. There is nothing telling me "buy buy buy" or "sell sell sell".
Posted by Alex Filonov at 4:58 PM