PalmStop
January 29th, 2021
1 minute read
Lesson
As you might have noticed, we’ve just had a very interesting financial markets lesson. Several stocks whose prices have been falling for a while, attracted a huge amount of short positions. Then other investors started to buy the shares & the shorts got caught.. short. The share prices then exploded higher as the short investors tried frantically to cover positions.
Palm vs Dow
This is what can happen when a price has been falling for so long that investors assume it will keep falling, but it doesn’t. Looking around I found another one. This is a relative price. It’s the relative of the palm oil price to the world’s most successful stock-market the Dow Jones Index. This relative is making a ‘golden cross’
2006 & 2012
My golden cross is when the 20 months moving average crosses the 50 month average. In the chart above you can see this happened back in 2006 when commodity prices suddenly took off. After the cross above the average, the price shot up. The opposite happened in 2012. After the golden cross below the 50 month average, the price collapsed.
2021
Now in early 2021, the cross is happening again as the 20 month average is crossing back above the 50 month, pulled up by the rising palm oil price & the struggling Dow. Right now the two averages are matching so it’s still early, but it looks inevitable they will cross & will likely result in a surge in the price again.
Short
In my opinion the world is short commodities. After years of pressure which has restricted growth , supplies are tight. A catalyst could be reopening of restaurants likely to take place the next few months. As this happens we will find out just how short the world is of palm oil & how much scramble is needed to cover it.
1 minute read
Lesson
As you might have noticed, we’ve just had a very interesting financial markets lesson. Several stocks whose prices have been falling for a while, attracted a huge amount of short positions. Then other investors started to buy the shares & the shorts got caught.. short. The share prices then exploded higher as the short investors tried frantically to cover positions.
Palm vs Dow
This is what can happen when a price has been falling for so long that investors assume it will keep falling, but it doesn’t. Looking around I found another one. This is a relative price. It’s the relative of the palm oil price to the world’s most successful stock-market the Dow Jones Index. This relative is making a ‘golden cross’
2006 & 2012
My golden cross is when the 20 months moving average crosses the 50 month average. In the chart above you can see this happened back in 2006 when commodity prices suddenly took off. After the cross above the average, the price shot up. The opposite happened in 2012. After the golden cross below the 50 month average, the price collapsed.
2021
Now in early 2021, the cross is happening again as the 20 month average is crossing back above the 50 month, pulled up by the rising palm oil price & the struggling Dow. Right now the two averages are matching so it’s still early, but it looks inevitable they will cross & will likely result in a surge in the price again.
Short
In my opinion the world is short commodities. After years of pressure which has restricted growth , supplies are tight. A catalyst could be reopening of restaurants likely to take place the next few months. As this happens we will find out just how short the world is of palm oil & how much scramble is needed to cover it.
