As virtually every globally traded asset is either at or near historic highs or historic lows, the majority of trades appear to be over-crowded at these levels. Equities are near all-time highs, so almost all traders are bearish on the indices; that leads to shorts piling in at relatively the same levels, before being squeezed out of their positions by the slightest uptick, as shorts rush to cover, which tends to lead to over-extended short-lived rallies fueled by marginal panic buying. After all, if one is short and wrong, one is equally as right to go long, and vice versa. Similarly, as commodities trend upward after showing relatively strong support near their 2016 lows, the majority of traders have piled in long, as commodities show the greatest potential upside. However, as a June hike from the Fed and negative interest rates in Europe also give potential for a strong dollar, any significant pullback in commodities induces panic selling, as traders dread being on the wrong side of the trade and either sell-out or attempt to go short at slightest sign of weakness. The lack of market direction should permeate equities and commodities until the Fed makes its official announcement on June 15, when the volatility of fear-induced panic trades dissipates into a general directional bias for commodities and equities.
