It has been an interesting past two days in commodity markets, with some sharp moves up/then down, before settling in a little today…. with Silver moving nearly 10% in a session and a half, Cotton falling from its highs, and grain markets moving: (Sugar has dropped about -7% in the hour or so since we started writing this)

	11/09 High	11/10 Low	% Move
Silver	2934	2648.5	-9.7%
Wheat	7606	6950	-8.6%
Cotton	157.23	145.81	-7.3%
Corn	605	565.25	-6.6%
Soybeans	1330.75	1269.5	-4.6%

This movement comes on the back of several markets hitting new all time (nominal) and or multi-year highs, while other markets remain well below their all time highs despite recent moves to the upside:

Aussie	all time high	Corn	-37% below ’08 high
Canadian	nearing all time high	Crude	-52% off ’08 high
coffee	13 yr highs	S&P	-23% off ’07 high
Cotton	9 yr high	Soybeans	-11% off ’08 high
Gold	all time high	Wheat	-56% off ’08 high
Silver	all time high
Sugar	29 year high

What does it all mean? Such volatility has been associated with tops and bottoms in the past, and it could be the commodity bulls are running out of steam a little. But seeing how far Wheat and Crude (for example) have to go to match the highs in other markets…. maybe the recent volatility is just signaling a breather and market consolidation before pushing higher.

We’ll have to wait and see where we go from here,  but the commodity volatility has caused short term losses for some managed futures managers.  Short option seller ACE Diversified has felt the brunt of the moves and is down significantly for the month. Meanwhile, shorter-term multi-market traders likeDominion Capital andFutures Truth SAM 101 have been whipsawed a few times of late, buying false breakouts lower. Finally, spread traderEmil van Essen is down about -2% in the past few days, as volatility usually shows up in the front month contracts more so than in back month contracts (the theory being that whatever today’s crisis is, can be worked out by the further out delivery date).

We had one client start Emil Van Essen on the pullback today, and applaud that contrarian view – as expanding volatility should be good for managed futures as a whole moving forward.