Beginning Of A Bigger Commodity Move?

I wrote last week that commodities may see some downward pressure as the CME raised its margin requirements.  To my surprise, it didn’t have much effect.  But, today, we’re seeing wheat and soybeans down over 5.5%.  Oil is down $3.63, and metals are down between 1-3%.  The market appears to like this so far.  Over the next few days, it’ll be a good test for commodities.  If it can overcome the new margin requirement selling, then we know there’s more demand and less speculation in prices of many commodities.

At midday, the Dow is up almost 100.  I’m using this opportunity to add a little short as I need the market to prove itself to me.  Until otherwise noted, this is a sell the rally market.  It’s unfortunate, but true.

Financials and tech are leading the way today.  Up volume is beating down volume about 2:1.  Nothing to write home about.  I don’t doubt we’re in a bottoming process and one of these times, these rallies will hold.  That’s why I continue to reiterate flexibility and being nimble.  If you’re a slow mover (401-K, etc.), I’d stay heavy cash.  But, for an average portfolio, there is still whipsaw risk.  I covered some short last week only to add some back on today.  This isn’t a science and you have to leave yourself room for minor mistakes in order to commit the big ones.

Reducing exposure is the prudent move right now.

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