As Goes Orange Juice, So Go Equities ?

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

Definitely among the best and most reliable trading commentary you'll find anywhere at any price.

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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