CYCLES
There Is A Season And A Time
Guided By Seasonal Indexes
by Darin Newsom
We've all done it. Whether you are a banker, lawyer, trader, or analyst, we have all caught ourselves staring wistfully out the office window to see spring turn to summer, then autumn, and finally winter. That is the seasonal cycle of nature and it is just as true watching commodity markets on the computer screen as it is looking out the window.
SEASONALITY IN COMMODITIES
Commodities have seasonal cycles that reflect the normal supply and demand situation of the individual market throughout the course of a calendar year. But just as the argument has been made that industrial progress is changing the cycles in nature, there is talk that the growth of computer trading in commodities is either changing the way seasonal cycles can be studied or doing away with their importance to analysis altogether.
The study of seasonal cycles has been around for as long as there have been markets in which to trade. In the early days of grain trading it was inevitable that prices would be their lowest at harvest time, when available supplies were at their greatest. Months later, of course, usually during planting season, prices would be their highest as demand increased and producers were too busy in the field to continue hauling supplies to town. This cyclical pattern could have been the origin of the adage "Buy low and sell high."
...Continued in the November issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the November 2007 issue of Technical Analysis of
STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2007, Technical Analysis, Inc.
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