As Goes Orange Juice, So Go Equities ?

May 13, 2012 6:53 PM ETUDOW, SDOW
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Contributor Since 2011

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We should start by making it clear that there is no historically consistent correlation between orange juice futures and equities that we're aware of. However, it is always a good time to be reminded what can, and often does, happen in any market.

Click this text to view a weekly chart for orange juice futures.

We note that orange juice hit highs in 2007 from which it collapsed until it bottomed in March of 2009, then went up at a 45-degree angle virtually without interruption until early 2012 at which point it made front-page news as it hit multi-year highs. Then over the course of three months it fell almost 50%, so far.

Here's a chart of the DJIA :

The parallels to the orange juice chart & commentary are plainly obvious, we hope. Will equities drop 50%? It happened in 2008 and will again sometime in the future. Silver collapsed last year. Gold probably will in the future.

Reminder - never be complacent and be very careful of "buy the dips" mentality. Many were rushing to buy orange juice when it dipped to $180 a few weeks ago and now it's at $118. History repeats, at some point.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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