Going short on metal commodity names

I have decided to go on short on some metal commodity names. Oils have tanked and I see more downside for the oil. Fed Beige book shows slowing economic momentum in the 5 out of 12 districts. It also noted slowing housing and manufacturing sector. Globally interest rates are rising. Inflation in China is concerning many people. China is expected to strengthen Yuan and hike interest rates in the future to slow down the economic expansion. Korea has implemented rate hike several times this year and construction activities in Korea has slowed. US housing market are going to be in deep slump this year. Everyone knows the price of the house is falling. No one is willing to step up and buy the house when the price is falling even for the interested buyers. As the housing market enters seasonally the slowest time of the year (winter), you will see some ugly housing number in the US. This means reduced construction and consumption of the basic materials.

Commodity bulls maintain we may be only half way through the commodity bull cycle. However, there clearly has been much speculation in the commodity market. As the US large cap and other tech issues have lagged the market, hedgies have taken a lot of risks in investing in the emerging markets and jump on the bandwagon of India and China expansion. They all got in and touted the oil and commodity names during last 3 to 4 years. These stocks have soared, some as much as 1000%. Look at any commodity companies and you will see some incredible charts.

Commodity still may be in bull cycle. But the stock price may have outrun the fundamentals as these stocks have high speculation premium. I believe with the recent price fall in the oil, slowing economy in the US and abroad, and prospect of rising interest rate in the emerging markets, the liquidity may not be no longer there to support high commodity stock value as the speculation premium disappears.

I locked in my profit with CTRP in my trading portfolio and with the proceeds, shorted PD, N, and ATI. PD (Phelps Dodge) is the copper commodity names. N (INCO) is the nickel commodity play and ATI (Allegany) is the specialty commodity company such as titanium. Let us see how my trades turn out.