Today we are seeing very broad-based commodities prices weakness. I wrote a posting last week indicating that volume indicators were showing some weakness, but today, we are seeing not only volume indicators showing selling activity. We are seeing prices fall in crude oil, gold, all the major grains, and most of the major softs, including sugar, cotton, coffee, and cocoa. In addition, I have been observing falling open interest, which is slightly predictive of a sell-off.
This may be significant. To reiterate, we are seeing three phenomenon occur simultaneously in numerous commodities in fuels, metals, grains, and softs:
- Falling prices
- Selling-based volume in the Klinger volume indicator
- Falling Open Interest
Often, commodities show price retracements in the face of a recession and growth contraction in the business sector, and demand for many commodities wanes. Is that what we're seeing now? I don't know! Perhaps this is merely a one-day or temporary phenomena that will eventually give way to the continuation of the commodity bull market. But I am certainly beginning to wonder, especially since the volume indicators, which tend to be quite leading and predictive in nature, began falling a week or so ago on the daily charts. Now, we are seeing falling prices across the board joined with falling open interest in addition to volume indicators showing distribution. This is a time for perhaps more short-term trading and greater alertness and caution. Coming days should be interesting for commodities traders. The easy money may be coming to an end for longer-term traders.
