Case for Commodities

Sun Nov16 (NY) - by Anatoly Veltman - Chief Global Analyst - I noticed that CRB Index peaked 7/3/2008 at 615. Now, not even 5 months later it's laboring a base just below 350. This is an attractive level to some technicians:1. Index was born Q4 of 1971, as low as 96 - and it just retraced over half of its 37-year appreciation in 4 months!2. Last Impulse commenced November 2001 around 183 - and current retracement will touch 61.8% of 183->615 up-wave at 348.3. Previous Impulse's 1980 peak was 338 - and previous historic resistance is often expected to become next strong support. At November's "Inside Commodities" Conference held at the NYSE, keynote Jimmy Rogers compared this commodity meltdown with lightning stock correction of 1987. Both were forced-selling precipitated, as opposed to bona-fide fundamental Bear Markets. Open Interest (O.I.) in all commodity futures quickly collapsed from this year's records to 2-year or more lows. Some positive internals in recent days include: 1. Crude, HO and RB O.I. all rallied 15% in a month!2. Wheat's O.I. just rallied 10% in 3 days!3. Platinum's O.I. is 40% off of it lows! Gold's O.I. has languished at 2-year low; but I don't see that as a very bearish sign longer term. In case of Gold, I'd be worried if O.I. were high during current moderate price erosion. To me: that would be a hint of increased authorities' sales or loaning. I find it Bullish about the Commitment of Traders (C.O.T.) data - that Small Specs are unusually Short of Gold! I would get most interested, if Gold were to wash-out toward $643 level. That's exactly where Gold commenced its last Impulse; and that's precise 50% of the entire $252->$1034 run! Alas, with dollar de-basing that I predict to become obvious (to everyone at once) very soon, I doubt that current correction will reach that deep. I've never been a Gold bug (even 19 years ago, when my trading volumes were the highest among non-commercial players at the Comex); however, with tough choices incoming administration is facing - I wouldn't be surprised if Gold quadrupled in nominal terms during their tenure... Latest C.O.T. report in Crude boggles one's mind: in 11/5-11 period, as futures dropped from $70.50->$59, Large Specs increased their Net Short exposure by 400%! Commercials are now Net Long of Crude, and so (alas) Small Specs. Still, it's unbelievable that Large Specs have found liquid funds in present environment - to speculate on Crude's further fall . . . (to read the remainder of this article, please log in below.)