Accumulation In Key Soft Commodities - Opinion vs Message of Market

A growing number of experts are beginning to suggest that the commodity rally is beginning to show signs of excess. Be wary of general conclusions based on broad asset class that ignores the movement of leverage money.

The message of the market, much different than opinion, illustrates a picture of accumulation and rotation within the commodities. Soft commodities such as cotton and sugar have been quietly accumulated by connected players into weakness as retail money runs for cover. This quiet accumulation is reflected by high DI readings.

COT Money Flows:

Messsage of the Markets

Cotton


Sugar


Opinion

Headline: Commodities start to show signs of excess
'China may be the riskiest pressure point'

Signs of excess are starting to accumulate in commodity prices according to BCa Research, and if you pay attention to the four "sweet spots" fuelling the rally, you can plan ahead for a bearish reversal.

The four sweet spots are tied to the fundamentals currently behind the extraordinary rise in commodity prices. they include:

- A U.S. economy that is growing steadily without generating inflation;

- Oil prices balanced between being high though not economically damaging;

- A global economy able to absorb the weak U.s. dollar; and

- Chinese authorities finetuning their economy for a soft landing.

A glitch in any of these four would pull out a key support from the commodity rally, and signal a bearish reversal.

"It is easy to sustain the broadly-based uptrend as long as the four sweet spots are intact," David abramson, managing editor for BCa Research, wrote in a note. "But it is prudent to plan for the inevitable shift in one or more of them."

Source: montrealgazette.com