Is the Correction in Commodities Over? By Chuck Kowalski, About.com Guide

The old adage that they fall faster than they go up is resonating though the minds of commodity traders. It might be hard to believe that silver could make a more explosive move than the recent $23 rise in just a few months, but the market gave back more than half of those gains in just 5 days. Most commodities have given back a good chunk of their gains for the year in recent weeks and the commodity averages are only slightly positive for the year.

We now have to figure out whether commodities have turned down and more losses are ahead or whether another buying opportunity is approaching. The markets look like they have stabilized on Friday morning on the back of a positive report on employment. Hasn't this been a common theme for the last two years? The markets look like they are crashing and then we get a good economic report from the government and the markets rally sharply. Just like that, the correction is over.

There have been several quick and sharp corrections in commodities and stocks during the last couple years. The thing to remember is that the markets just keep coming back and making new highs. The markets may have recently moved too far and too fast, but nothing has changed in the long-term fundamental outlook. There was a scramble for the exits in highly speculative markets like silver and crude oil, while many other commodities fell due to commodity ETF selling and other hedge fund commodity liquidation. Friday could mark the short term bottom or we might get one more leg lower before there is a good buying opportunity.
I read a rather amusing story that George Soros said he was selling his massive gold position and that was a major reason gold and other commodities sold off. I can't tell you how many times over the last 20 years I heard Soros play this game. There is no way he has a major position to sell and he tells the public before he is going to sell it. In fact he does the opposite. He probably already unloaded his position and he wants to get back in at a cheaper price. This is how someone of his stature can make some easy money.