Thoughts on the commodity futures markets as we put a wrap up on the week:
- Oil topping 140 as I write – this market continues to defy gravity. Too scary for me to try and play either side of this market.
- The Fed’s decision to stay put (a real shocker) really put a kick start in commodities across the board.
- The grains have rallied further this week – I’m glad I still have my wheat position, and wish I still had my corn position.
- Not to dwell on what could have been, live cattle is rallying after a slow start to the week. Personally I am more cautious of the nearer term contracts, but still bullish on the Dec ’08 and ’09 contracts. However I am not looking to add more yet, as I’m comfortable with this 4 contract base on my pyramid.
- The softs have also been rallying, with coffee leading the charge. I finally jumped into coffee yesterday – and true to form, it’s down a bit today. I am cautious of this recent coffee charge, as I’m not sure how much has been pure speculation, and how much is really on supply concerns. But I do think coffee has huge upside potential from here (eventually), so there’s no use sitting on the sidelines forever.
- Looks like that dollar pop may be over – and the party may definitely be over on Wall St. I expect the commodity markets to turn even wilder over the next year or two, as the mass exodus to this asset class continues. Net-net this should be a positive thing for us – just take your positions early, and be careful on the leverage, as the volatility will be quite choppy.