One of the difficulties with trading commodities is the low mix between public and private information. Public information will usually be the announcements from the government in the form of some macro data. This could also be firm specific information. but is disseminated to the entire market at one time. Private information is data that which is gathered by an individual and is not obtained simultaneously with other investors. This information is not revealed through an announcements but through the activities of the holder of the private information through its impact on price. A large grain company will have private information on their activity which may be displayed through their actions in the market.
If there is little public information in the market, that is, infrequent announcements, there is a greater chance for a large surprise for those who do not gather private information and depend on this information. So now we come to the acreage report that was announced today. The government reported that acreage was much greater than expected. This was especially surprising given all of the poor weather in the Midwest. The result is that a number of the grain markets were limit down. The reaction was swift and severe because there was little other prior public information to suggest what would be the direction of this report.
Usually in financial markets you have a number of announcements through the month that provide an indication of the direction of the macro environment. There will be surprises but there also may be a better idea of where an economy may be headed. This does not mean that there will not be surprises but there will less concentration of risk like what we may see in commodity announcements.
The lack of public information is also the reason why there is a greater concentration in technical analysis over fundamental analysis. There will be fewer fundamentalist if there is less data to work with. If all you have is price information, then that is what you will use.
If there is little public information in the market, that is, infrequent announcements, there is a greater chance for a large surprise for those who do not gather private information and depend on this information. So now we come to the acreage report that was announced today. The government reported that acreage was much greater than expected. This was especially surprising given all of the poor weather in the Midwest. The result is that a number of the grain markets were limit down. The reaction was swift and severe because there was little other prior public information to suggest what would be the direction of this report.
Usually in financial markets you have a number of announcements through the month that provide an indication of the direction of the macro environment. There will be surprises but there also may be a better idea of where an economy may be headed. This does not mean that there will not be surprises but there will less concentration of risk like what we may see in commodity announcements.
The lack of public information is also the reason why there is a greater concentration in technical analysis over fundamental analysis. There will be fewer fundamentalist if there is less data to work with. If all you have is price information, then that is what you will use.
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