Soaring Commodities Look to Diverge
Commodities have been moving higher with the broad equity markets over the last two months in a sympathetic bet that economic growth will stabilize and resume its upward trajectory later this year and into 2010. But most of those futures markets now look tired and stretched, raising doubts about the resilience of buying interest in the months ahead.
Commodity-related equities are especially risky going forward because they respond to the vagaries of the futures markets as well as the tug and pull of the broader indices. A selloff in the S&P 500 and Dow Industrials concurrent with a futures downturn would have a dramatic effect on these stocks, because they would lose both sources of uptrend support.
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