Analysis

Not so long ago, only few people would have been able to comment on commodities or the commodities markets. But since early 2007 this has changed. The media has been commenting on the increasing prices of metals and oil as a result of the boom of 2003 – 2007. The interest for commodities began to rise with these industrial products, but with the huge leap of some of the agricultural commodities in 2007, the media began to focus on agricultural commodities. Today, everyone is talking about agricultural commodities like they talked about tech companies in the late 90’s.

I’m not going to put any coating on the index, it’s been quite a depressive start for the year 2008, when it comes to the S&P 500. The index managed to stay in a sideways trending pattern most of 2007, only to crash at the beginning of 2008. Of course there were some dips in 2007, but the index always managed to pick up some steam and lift into “safer” territory. But now it looks like the end, or that’s what we’re seeing on TV and in the news. The Feds had to step in and cut the rates in what looked more like a panic reaction than a calculated move of a long term plan.

The sugar has gone mad, or so they say. One recommendation following the 17. of January run was “Buyer beware: there are no limits on price movements on the #11 world sugar contract. We suggest longs take the money and run. One veteran trader we spoke with said that he had never seen anything like this situation before.” So what was it he’d never seen before, the run in the March contract setting a low of 12.10 cents and a high of 12.65 or 0.55 cents in the pit trade? Or was it the low of 11.74 cents to 13.09 or 1.39 cents in the electronic trade?

When looking at the softs, or exotics, it can’t be said that they’ve had a good year when looking at 2007. For the most parts, 2007 has been steady to downward for the group in general, contrary to the other agricultural products. While grains rally to new heights, the softs just warm the benches, waiting for the coach to call them out to the field. The fundamental attitude has been, for some time now, that there is little in store for the softs, but lately there have been some changes.

It can not be said that the meats have been doing anything marvellous in 2007, as none of the products have been able to make any significant advance in their price. High prices in the grains could change that, with higher feeding cost. If breeders can’t break even due to feed cost, a cut in production can be expected. Usually meats react to higher feed prices some time after the increase of feed prices, as change in breeding takes time to materialise. The year 2008 could see some increases in the price of meat products.

The agricultural commodities market is the oldest and most versatile of the commodities futures markets. 2007 saw a huge price move to the upside in some of the agricultural groups, while others have been more bearish in their price movement. Due to the diversity of the agricultural commodities, we will be looking at them based on the traditional grouping of grains, meats and softs or exotics.

The energy markets have got a lot of the focus that commodities got last year. The emerging commodity interest has been bombarded with a bullish energy market, especially crude oil, the favourite of all bulls. The present world situation is such that a change in the energy market, from a bull to a bear, is unlikely. The only bearish moments could be some temporary corrections.

The Metals have been having some good time the last few years. The precious metals have continued the advance, but the none precious metals have not been so lucky. We believe that there are many profitable opportunities in the metals, mostly the precious metals, even though a short term trading in the none precious metals could turn out to be profitable.

At the beginning of the new year, we will be going over the markets and looking at the possibilities. We will be publishing analysis about the metals, energy and agricultural markets the next few days, hoping to give our readers an overview for the next year.

In general, we believe that the markets will continue their bullish sentiments, with occasional correctional moves to the downside. Some markets will be very bullish and others only bullish, with some markets taking a dip. But what ever will be the trend for each market, be believe the opportunities to be abundant.

We’ve been following the December futures contract of the S&P 500 index for some time now and frankly the index has been rather insecure. Though it has offered some profitable opportunities for swing traders, a conventional bull or bear, has not been able to make a lot of profit from the long term perspective. The market has shown to be rather insecure when it comes to directions for the S&P 500 index.