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The Old Man and the Markets

This post was originally published on jpfs.com

Since the beginning of this year (see my report on January 18th), in addition to Gold, I have also suggested that people look into commodity markets, specifically copper, aluminium, corn, wheat, and Natural Gas, and consider buying these products on any further weakness.

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The underlying logic behind this view was that prices had been depressed for some time, and therefore, any surprises could cause the markets to break upwards, possibly quite significantly. I wasn’t suggesting that we would enter into a commodity super-cycle as some had suggested, but on my charts, the markets looked poised for decent rallies; they just needed a spark from somewhere.

Back then, my comments fell on deaf ears because most trend-following traders were discussing AI and the impending launch of a BTC ETF. I hope these individuals made plenty of money from their speculative activities in the world of digital assets, and I hope they continue to do so. However, the reality is that they had the potential to make much more profit from commodity speculation than they had in their chosen coin, stock, bond, or FX cross.

Few people advocate for the need to have a heavily diversified portfolio more than I do. Considering what has happened this year in commodity markets, I see it as another opportunity to encourage traders and speculators who pigeonhole themselves as experts in one product or sector to broaden their horizons. And I will add, if you base your speculative decisions on technical analysis, which most self-directed traders do, scanning a broad range of different products is hardly difficult.

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Don’t misunderstand me; I know commodity traders who do not look for opportunities outside of their chosen sector and become just as blinkered as other traders who pigeonhole themselves. But for someone speculating to make money – and that is always the aim at the end of the day – there is no excuse for not spreading your wings and looking for good investment opportunities in all and any capital markets. Moreover, since the advent of CFDs, you can involve yourself in these commodities without worrying too much about how futures markets work, with their expiry dates and other technical aspects.

 

As a technical analyst, you don’t have to concern yourself too much about the fundamentals of each market because the diversity is such that you will never come to understand all aspects of every commodity. But a basic understanding is always useful, and when markets rally, or indeed, after they rally, there are always commentators willing to tell you why.

 

Long periods of depressed prices cause a decline in investment in production, ultimately leading to shortages and eventually increases in prices – the basic laws of supply and demand.

Then, of course, you have political interference. For example, putting a ban on importing Russian produce… (God knows how that is supposed to help us with our inflation problems!) And don’t forget global warming, or as us intelligent people call it, the weather. Weather conditions during certain times of the year will always play a big role in deciding crop sizes.

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These fundamentals will always be discussed to justify the reasons for each move, but typically, such comments come very late and after the market has moved. It’s nice to know these things, but if you are looking at charts, such stories, while valid, are just talking points that pad out investment recommendations.

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As you know, I do not issue trading recommendations or post charts because that is not the reason for my reports. My objective is purely to point people towards opportunities they should or could investigate and to provide a commentary, different from others, that encourages traders to look at various capital market issues from different angles.

You may like them or not, agree or not. But either way, I hope my reports encourage investors to think for themselves and not rely on “experts” who are still, with all due respect, wet behind the ears.

The post The Old Man and the Markets first appeared on JP Fund Services.

The post The Old Man and the Markets appeared first on JP Fund Services.

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