28, 2007 -- In my "twice a day" newsletter Commodity Insight, I broadcast market information, news and trading suggestions just after the markets begin trading at 10 a.m. Central Time and again at noon when there is but a few hours left in the session. My window for offering advice and strategy in other words is limited to twice a day. After that, I have to wait for another day to roll around and with it new forces that can push the markets one way or another.
It is the "dead air time" between my final broadcast at 12 noon one day and my next broadcast at 10 a.m. the next I fear most. When the markets are open and trading I can see and hear what is going on and relay the information. But in the "dead air time," market forces real or imagined can cause wide swings in the markets that are impossible to avoid because no one knew about them. And that is why there are times when playing a hunch or having a gut feeling is more important than anything else. Today, was the last full trading day of 2007 and it was for most of the day positive with more big gains seen with grains, metals, petroleum, bonds and a stock market that held steady. It was another day of optimism across the board.
In my first broadcast of the day, for example, in the Other Markets & Comments section I wrote:"Crude is up another $1.17 today, with prices near $98. From the low set this month to this mornings high prices are up $10 a barrel. And you wonder why the CRB, grains, metals and most other commodity markets are poker hot?"
But as the day wore on I became more and more uncomfortable with what I was seeing and hearing. In my final broadcast in the same section and using capital letters for emphasis I wrote "I WOULD NOT CARRY ANY MARKET INTO MONDAY FROM THE LONG SIDE. NOT A ONE. I DO NOT LIKE THE FEEL OF THE MARKETPLACE THIS AFTERNOON. THE NUMBER OF FIRMS TOUTING THE LONG SIDE OF SO MANY MARKETS HAS ME VERY SPOOKED. I AM NOT LOOKING AT A BAD DAY. FEW MARKETS ARE SHOWING UNUSUAL WEAKNESS. WHAT I AM CONCERNED WITH ARE THE NUMBER OF FIRMS TOUTING THE LONG SIDE OF THE MARKETS AT TODAY'S HISTORICALLY HIGH LEVELS. THAT IS MY GUT FEELING. DO NOT HOLD ANY MARKET INTO THE WEEKEND FROM THE LONG SIDE. NOT A ONE."
Seldom do I assume the role of "Chicken Little" and run around yelling "the sky is falling, the sky is falling." But I did it this afternoon. And I am so concerned about the unbridled enthusiasm there is for the long side of most markets with valuations at historically high prices I am cutting this weeks column short to allow my gut feelings to sink in.
(The information in this article is the opinion of Commodity Insight's Jerry Welch and subject to change without notice.)