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How Long Will Commodities Correction Last?

By October 27, 2012

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Commodities have fallen about 7 percent in recent weeks as external market factors are causing liquidation across many commodities.  Just as the stock market has fallen, commodities have fallen in step.

There are several reasons you can use to explain why the markets have dropped, but the main overall reason has to do with concerns about the economy.  We continue to throw trillions of dollars at the economy to stimulate growth, but the results are still anemic.  The saving grace for the market is the quantitative easing programs from the Fed.

The markets are worried that a Romney victory could actually jeopardize the easy money position.  It looks like Bernanke will be done in 2014.  He has played the pivotal role in juicing the markets.  Could he be replaced by someone who would curtail quantitative easing?

We have seen scenarios like this play out several times in the last few years.  We get sharp corrections, but the long term move is higher.  The odds say this is another one of them.  Moves like this can drive commodity trading advisors nuts, but they do provide some good trading opportunities.

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