A '70s Bull Market for Commodities in the Offing?

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Chris Damas submits:

In the early '80s, I read a paperback by famed Toronto stock speculator, TV commentator, Chief Coroner and Parkinson's disease treatment advocate, Morty Schulman. At the time, I was a neophyte investor with little cash.

It was titled "How to Make a Million Dollars in Commodities" or something to that effect. By the time I had bought it, interest rates had already been ratcheted up by Fed Chairman Paul Volcker and were taking the steam out of the markets. The big mid to late '70s bull market in commodities was already dead in the water. I found Dr. Schulman's book in the used book bargain bin.

Well, I've had this feeling all summer that we are going back to the '70s trading environment. Tuesday's market action supports this view. Huge government debts will be less of an issue when they are trading in tomorrow's devalued currencies. The USD in particular, looks orphaned now that QE II has been christened, if not launched. The Fed's laissez faire policies have opened the door to the commodity markets. Canadian rates could be on hold…. what's not to like?

Tuesday shows benchmark near-month commodity futures enjoying price spikes for Gold ($1,340 up $24), Base Metals (Copper at $3.735 up 7.7 cents), WTI Crude Oil ($82.68 up $1.21). Combined with low and declining U.S. interest rates (bonds are actually rallying), this provides a potent mix for commodity and equity speculators. Let loose the animal spirits!

The U.S. bellwether S&P 500 index (SPX) is currently at 1,154.67, up 17.7 points (1.6%) and a hair away from the previous intraday high of 1,157.16 reached on September 30. Any higher and that would be the best level since late April's peak.

The DJIA is up 135 points at 10,885.8 (1.26%) but still below its intraday high of 10,949 set on September 30.

But the commodity-filled Canadian S&P/TSX index is already AT a new year high, 12,449.74 up 126.8 points (+1.0%), breaking its previous intraday level of 12,446.85 set on October 1st. This is in spite of a stronger Canadian dollar, now at 98.4 cents.

I think it might be a (read my lips PermaBears)…..BULL MARKET?!

Having said all this, we have the September ADP employment and U.S. Non-Farm payroll numbers to contend with Thursday and Friday. These have been the Scylla and Charibdis of any Greek odyssey to higher stock prices; sucking the indices down or plucking profits from trader pockets, to their dismay.

See also The Impact of Big Option Open Interest on seekingalpha.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , US Markets


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