Commodities Bounce Over?

commodities

  • Short covering rally running out of steam
  • Managed money (hedge funds) are fully long with downside risk increasing
  • Fundamental and physical market has yet to adjust to higher prices
  • Speculators are the driving force behind the recent rally
  • Technically, price action will need to see a significant cut in production (to balance supply and demand equilibrium)
  • Concern on China hard landing persist as it transition from manufacturing to service based economy
  • Dead cat bounce over – fundamental to take back control of price action
  • A healthy pullback will ease, perhaps allowing longs to rebuild and reload

Next directional move will determine one of the following factors:

  1. Range trading as price fluctuate and consolidate – fundamental picture improving with upside remain limited
  2. A retest of a new low but global demand should help minimize the damage as long as Central banks stick with monetary easing and there is a significant cut in production

 

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