Skeptical..

Besides the carry over induced Financial index fall today, the most notable action was in the commodity trade catching fire!.  The fire caught on to the point that even Curly, Moe and Larry on Fast Money were calling for a bottom reversal for the groups mid-day.    Maybe, here at DJIM, we're just Dumb & Dumber because we're highly skeptical of calling such a turn, so quickly.   Just yesterday the commodity GSCI index declared a 'bear market', it was off more than 20% off it's early July highs.  As, we said yesterday and before,  we're continuing to carry the best of breed in our commodity stocks on the Shadowlist because on any day they can produce fast upside points, unfortunately, until ... "something big and dramatic happens in the commodity, we are most likely to stay away from the sector for a while".   Of course, this does not mean you cannot play these intraday on days like today or probably tomorrow,  it's just we'd not be accumulating positions overnight and in every group.    Why else are we holding them on the shadowlist/ trading list day to day, if not to possibly trade them?.  It's the day to day list that shows the trading tone, individually and for group rotations.

We feel the commodity unravelled too quickly and it will take time to repair the lost momentum,  it won't happen overnight.    We are most skeptical because economic headwinds are starting in our home, the resource (not in the Olympics!!) rich Canada and spreading quickly overseas.   Downshift in growth is broadening and intensifying!!. This is going to be the next 'buzz' we'll be hearing over and over again and it will dampen any enthusiasm in our markets here, sooner than later.  The inflation shock trade  ballooned this year because demand was seemingly endless,  the USD was weakening and US credit crunch made many chase the commodity trade.    We don't need to mention the effect of oil on this.   All this has evaporated to a certain degree in each factor and this is why we are skeptical of the inflation shock trade coming back overnight.  It doesn't mean these groups can't bounce...anything on the market has the potential to bounce, it doesn't mean the inflation trade is back. 

Most importantly, we have other things to trade now and therefore don't really need to worry about missing something in the commodity plays early on.