Home / Markets / Markets Analysis / Consolidation or another leg down?

Consolidation or another leg down?

Agriculture.com Staff 11/21/2008 @ 1:04pm

Since crashing in early October, most commodities and stock market indexes have consolidated, suggesting the worst may be behind this year's sell-off. Yet, markets continue to struggle. A couple of key events have passed the last two months, with neither providing immediate marketplace confidence that many were hoping or expecting.

When the initial bailout package was proposed and looked as though it would pass Congress, the markets quickly responded by moving higher. There was a bullish enthusiasm and anticipation that, once credit became available, prices would reflect a less negative environment (and maybe even an inflationary concern). However, when the initial proposal failed in Congress, prices began to slide. When a package was finally approved, prices went into a major tailspin. The general thought was too little, too late. That was the first week of October.

Now, fast forward to mid-November. Most markets are considered to be consolidating but seem to have little enthusiasm or long-term buying interest. Most of the buying appears to be more prevalent from traders who are willing to take a shot at buying commodities or stocks. When prices rebound, they quickly look to sell. On the one hand, that is not all bad, considering there is buying interest and prices are trying to form a base. Is it the calm before the storm of another leg down?

The second major event thought to help provide stability was the Presidential election. General thought was once this was behind the market, there would be less uncertainty and more confidence. While markets may have shown some signs of life, especially in the stocks where prices made some major advances on certain days, in general, the trend remains down and still looks weak. The election is old news.

Where from here? Traders continue to grapple with the idea that the U.S. and the world are entering into what could be a deep and prolonged recession. However, over time many markets will likely recover. Prices were overbought in many sectors; commodities were no exception. Long-term growth in markets is accompanied by price corrections. If another leg down does occur, it will be just a matter of time before prices rebound and trade about where they currently are or higher.

If you have comments or questions, call Top Farmer at 1-800-TOP-FARM ext. 129 and ask for Bryan Doherty.

Since crashing in early October, most commodities and stock market indexes have consolidated, suggesting the worst may be behind this year's sell-off. Yet, markets continue to struggle. A couple of key events have passed the last two months, with neither providing immediate marketplace confidence that many were hoping or expecting.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Farm markets Rally on Weather, Ukraine