Commodities Experiencing a Record Sell-Off

While investors have spent the last few days focusing on the events in the financial services sector, commodities have been under heavy pressure. Much of the focus Wednesday was centered on the declines in gold and oil, which fell $59 (5.9%) and $4.94 (4.5%), respectively. Taken as a whole though, the entire sector has experienced a sell-off of record proportions.

As measured by the CRB Index, the two largest one-day declines in the commodity sector (since 1956) both occurred this week. Below, we highlight the ten largest one-day declines in the index, as well as the performance of the index going forward. Fortunately, for commodity bulls, the average return going forward has generally been positive. At the same time, however, investors who are bearish on the sector are likely to compare the sharp swings to the Nasdaq back in early 2000 (or the equity markets now).

Even after experiencing its two largest one-day sell-offs on record, the CRB Index still remains well above its recently surpassed highs from 2006, and year to date the index is up over 8%.

Comments

[sedek]

The correction looks like profit taking turning into a stampede. As the fundamentals haven't changed for the Dollar, I see this as an eventual buying opportunity, probably around $800 and <$90. The American Dollar still lacks fiscal discipline from either the FR or the US government and I see no signs of discipline being restored in an election year, so see the commodities drops as a reverse bubble, irrational depression, and a short opportunity till then.

[vboring]

commodities are falling because people think that stocks have hit bottom.

sharp rises in stocks despite bad news indicates that people think stocks have bottomed.

any news on stocks bad enough to convince people that our problems aren't over yet will send commodities back up.

i'm looking at banks with too many commercial real estate loans, chrysler, and any poor loan performance in Europe or the UK for news bad enough to do this.

[buyitcheap]

I agree... there is ample room for a significant pull back to the low 30s or high 20s for DBA as obscene money has been made here. It would certainly be a buying opportunity. Our inventories are so low, so much of the crops this year are already sold into December, and with just one good blight or other than record harvest this summer, the parabolic rise would resume.

[chancer]

If you are not in commodities, gold, silver, or energy, this correction is a buying opportunity.