RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Bull and Bear MarketOver the past six or seven years, commodity prices have really been crushed down. In most part due to the extreme highs that commodities hit between 2006 and 2008, known as the commodity market bubble. That last “bull run” in commodities began in 2003 (after the recession) and accelerated in 2004. Those record highs obviously result in big increases in production and rationing on the demand side. We had experienced such a huge supply of commodities at the same time as the “great recession” that there was really only one way for commodity prices to go. That’s lower!

So, why do I think that commodity markets are entering another bull market? The “great recession” ended several years ago. That long and painfully slow recovery is about to accelerate. Most commodities, like the energy and agricultural markets, have based long term bottoms and we are seeing increased demand in those markets. We also have to keep in mind that the world’s population is growing, and the demand for food and energy continues to grow. Commodity prices will respond to those demands even without any supply side issues.

If you look at gold futures, the proxy for commodities, you will see that gold has also based a long term bottom. Long term traders have little risk at these levels, and while these markets have already moved off their lows, there is still far more upside potential than downside risk. There will be ups and downs and risk does need to be managed. Trading commodities is not for everyone. However, if you think trading commodities is suitable for you, you should consider working with a knowledgeable professional who has a vested interest in your success. 

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Frank J. Cholly

Senior Market Strategist
Frank is a swap registered trader who brings his clients more than twenty-six years of commodity futures experience. He was a member at the Chicago Board of Trade for 10 years where he filled orders in the grain and financial pits. Frank was also a Lind-Waldock's floor manager for ten years and later joined on as a commodities broker.
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