May Day for Commodity Bulls

A reluctance to exit positions yesterday might have contributed to a muted reaction in the aftermath of the Fed.

But today the market is getting the reaction it hoped for; the dollar is rallying and commodities are getting killed. After sleeping on it, traders are running with the ball, and the Fed continues to pray:

Crude oil shows signs of backing away from its recent peak of $120 a barrel. As Dennis Gartman, in his widely-read Gartman Letter, today points out that rice—the subject of headlines about rationing at big box retailers and the cause of riots in less-developed countries—is showing the classic signs of a blow-off....The Fed seems to be keeping its fingers crossed this will work. The dollar and gold markets seem to be signaling the inflationary fever should break. The capital markets confidence seems to have improved. All that needs to happen is for the economy to follow suit. Barron’s

Randall Forsyth has been one of the few market mavens to publicly defend Bernanke and the innovative measures he pulled out of his hat. As much as I respect Paul Volcker, the pile on by him and other former Fed officials against Bernanke was premature. Were any bloggers on Ben’s side?  I am looking for signs of atonement in the lynch mob. A rush to judgment, indeed.

If the market does Ben’s dirty work, namely beating down commodities and bidding up the dollar, it will certainly make his job easier come late June when the Fed meets again.

And for now, rotation is the order of the day. Welcome to May 2008. New month, and apparently new themes.

The Fed Crosses Its Fingers
Barron’s

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