Commodities are Dead, Long Live Commodities

Commodities have taken a one two punch off their highs. Take for example the Morgan Stanley Commodity Related Equity Index (CRX), it has dropped nearly 5% off the top of its high, and similarly Potash (POT) down over 10% the past two days, even the AMEX Oil Index (XOI) has begun to freefall. When you have such huge simultaneous moves off the highs, it is a sign of a fundamental shift. Has the market decided commodities are no longer the place to make camp? Apparently it's that time again, the time for sector rotation, and the big money is tipping their cap and saying adios to commodities.

Where are they going? It looks like transports (particularly airlines), and the financial sector appear to be the benefactors. I would suspect that trucking may also find some relief, if oil drops, prices at the pump will soon follow. It may be a bit early to make this call, but more often than not, when we see big moves like this happen, sector rotation is the name of the game. This may be a good time to rethink your allocations of ETFs and index funds in your retirement account.

This is likely good for computer manufacturers as well, as precious metals will drop in price, as they are important in the production of printed circuit boards and other electrical components. Precious metals, particularly gold are important for miniaturization of components, such as those used in laptops and mobile devices, like Apple's MacBook, MacBook Pro, iPhone and iPod Touch.

Identifying a sector rotation in it's early stages is certainly speculative. Do you think big money is moving to financials? Write your comments below.