Solid Profit-Taking, Sell-Off in Commodities

Very solid and broadly-based sell-offs are occurring in the commodities markets today, including agricultural commodities (grains, some softs, gold, industrial metals, and crude oil). Gold has sold off almost $30 per ounce, and crude oil has told off nearly $4.00 per barrel from its recent highs. Of the most liquid commodities, only cotton is higher and has locked limit up for the second day in a row.

The most liquid commodities have been sold, which suggests to me that this is speculative profit-taking or other traders liquidating losing long positions that they placed at overbought price levels. I consider this to be a very good opportunity to buy into the dips if this correction is short-lived. If, however, the sell-off continues over several days, this could be a correction in commodities prices that may be needed and healthy. Could this be a pin prick in what some are calling a commodities bubble? Only time will tell!

DBC ETF (Powershares Liquid Commodity Index)

Crude Oil

Gold
Cocoa

Sugar

Soybeans Selling, Profit-Taking Begins

That was probably the shortest-lasting long-only decision in history. As you can see from this chart, soybean bullish exhaustion occurred just a few minutes following my last posting. I went short almost as soon as I sent the "send" button on my previous posting. As you can see from this chart, a head and shoulders top formed almost immediately, and prices only weakly set another new price high. Then, the bulls began to liquidate to take profits. This is evident from the heavy selling on the volume indicator that I have enclosed in a blue box at the bottom left of the chart. Volatility was still very good, and I shorted at the second shoulder for another profitable short trade.

I expect that more profit-taking will occur into the close, and then another bullish run will occur as people like me liquidate their short trades, causing another price spike before the closing bell for the week. I also anticipate a very high probability of a new closing high, as I indicated on my posting earlier today.