"Thanks for keeping up a very high standard of commentary and feeding the collective with a stream of interesting articles which we might have otherwise missed.

"I am curious about any commodities that you find attractive as shorts. I have shorts on in the base metals and have started to add to positions recently. I look at fundamentals a lot (selling markets in surplus and with growing stocks, for example) but in the past this hasn't always worked. The technicals are key of course but sometimes difficult to read. I take it that oil tempts you on the short side.

"Any comments from a technical perspective on these or other commodities?"

David Fuller's view Re commodities, for over two months Eoin and I have only shorted in our personal accounts because we felt that a significant correction was due, not least among industrial commodities which have contributed to inflationary pressures and slower GDP growth globally. Brent crude, in which Eoin opened a very timely short last Wednesday is the most notable example. Spikes in the price of crude oil have always weakened GDP growth in proportion to their severity.

However, while pointing out the susceptibility to setbacks, we have not been aggressive in our shorting of commodities because we regard current weakness as no more than a correction in a secular bull market for this volatile sector, driven by our resources theme of the last decade: "Supply Inelasticity Meets Rising Demand."

Consequently, we think that many industrial commodities will steady in line with Asian stock markets, as we also saw in 4Q 2008 following a much more serious slump in prices. Commodities were leaders in the recovery back then and I would not be surprised if this happened again. You may want to keep an eye on the Continuous Commodity Index (Old CRB) as a good overall guide.

I think it will move lower but at this stage of the market correction, among individual commodities I would prefer to short following technical rallies within this year's short to medium-term downward trends. Industrial and agricultural commodities which have been popular with investors in trackers are among the candidates, subject to technical action which I would pay the most attention to.

In addition to Brent crude, copper is interesting right now because it is ranging near some potential support but beneath a toppy formation. I remain a long-term bull of copper but if the current range proves to be a first step beneath a top, it could fall closer to 350¢ as investors/speculators are shaken out. Conversely, a push above 425¢ would begin to offset the short-term bearish hypothesis.

Coffee (Arabica and Robusta) are both toppy and wheat may have further to fall now that the weather in some key agricultural regions has improved.


Informative report on agricultural commodities - My thanks to a subscriber for this informative item which is posted without further comment.