(4-6-15) First of all here’s a secret for successful trading in today’ market volatility...
The most profitable trade in recent days has been the short on rally trade. Meanwhile market volatility continues because currency volatility is continuing.
Currency is the great equator in commodity prices because it sets up the relationship between the dollar and every other currency. By equator, we mean that the value of the dollar is measured by other so-called principal currencies, like Euros, Pound Sterling, Swiss Francs and the Yen.
Almost all commodities on the planet are traded in Dollars. Thus the Dollar becomes the arbiter or the equating factor in commodity prices.
You can see this through the market action Friday which is a good example. When the Euro rallied, the Dollar sold off, and when the Dollar sold off, it sparked a rally in commodities by short covering.
Investopedia defines “short covering” like this – “Buying back borrowed securities in order to close an open short position.