Wednesday October 4, 2006 - 10:44:00 GMT
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How much more to go?
â€˘ Growth in European service industries slowed more than forecast in September. (Bloomberg)
â€˘ Key Reports (WSJ):
7:30a.m. Sep Challenger Layoffs. Previous: +75.6%.
7:45a.m. ICSC Store Sales Index For Sept 30 Wk. Previous: -0.6%.
8:55a.m. Redbook Retail Sales Index. For Sept 30 Wk. Previous: +0.1%.
5:00p.m. ABC/Wash Post Consumer Conf. For Oct 1 Wk. Previous: -12.
â€śBeen in this game one-hundred years, but I see new ways to lose 'em I never knew existed before.â€ť
FX Trading â€“ How much more to go?
Weâ€™ve talked here before, many times, about the air coming out of commodities, and the correlation between commodity moves and the US dollar. The background belief that as spec money comes out of commodities, much of it trickles back to the US for safekeeping supporting the lowly buck on money flow. It seems that dynamic continues to play out.
Chart: $ Index vs. Commodities Index
Of course the question no one can answer is when does this run out of commoditiesâ€”run its course. Well, if we step back and see just how far commodities as an asset class has come, one could surmise/guess this correction could continue for some time and the overall bull market in commodities would still be technically intact. After all, it has to be a scary and nasty correction in order to shake out the bullsâ€”that is what markets do; they cleanse themselves for the next leg. [â€śNew figures show that more than 1,000 hedge funds have shut in the past two years, as competition has squeezed profits. Even some veteran managers, in a bid to boost returns, have made concentrated bets that have backfired. All this has set up the $1.23 trillion industry for its first meaningful consolidation, Wall Street executives say,â€ť the Journal reported this morning.]
Chart: Commodities Index Weekly
This market cleansing process shows us why it is always easier to think about riding a long-term trend than it is to do. It takes real conviction, deep pockets, low leverage, and probably a bit of luck.
Jack Crooks, Editor of The Money Trader
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