Thursday, March 20, 2008

Commodities correcting

I know there are many who don't see much value in the COT's. With the correction in commodities now upon us this is where the COT's will be worth their weight in gold (pun intended). As I noted last week I reduced my precious metal holdings back to my core position. Now I need some kind of signal to let me know when it's safe to get back in the water again. This is where the COT's come in handy. I don't want to start buying again until the commercials are doing the same. I don't want to stand on the tracks in front of the train just follow behind it. At some point in the next few weeks or months we will likely get a buy signal for the metals from the COT. Until that time I will patiently sit and twiddle my thumbs. I'm also looking at the T1 signal. A trade back to the consolidation area of $800-$850 would satisfy the second part of a T1 trade before going higher. I expect it won't be long now before we hear the commodity bears coming out in force and telling us the commodity bull is dead. (believe me they will be squealing for years yet) I'll tell you right now that nothing is happening that hasn't happened before. For those that bought late and pushed it a little too far and are now caught in the correction my advise to you is what are you worried about? This is a secular bull market. The bull will eventually correct all timing mistakes. Stick those gold coins or silver bars back in the vault and forget about them.

One side note Robert L pointed out in the last thread the huge selling on strength today similar to what we saw in late Dec. right before the waterfall decline. As I pointed out in tonight's update I have no desire to trade the market from the long side. The larger trend is now down and I don't trade against the larger trend. I would have no idea when to sell as the larger trend can reassert at any time. If I had to guess I would think that commodities and the market will probably bottom at the same time. That's just a guess though and I have no special insight as to whether we've seen the 4 year cycle low already or not. Let's just say I'm still skeptical that the greatest financial crisis in history along with a spike in energy can be sidestepped with a meager 19% decline no matter how much money the Fed throws at the market. More in tonight's update.