Please keep in mind that pyramiding traders - which is most momentum traders that are trading the commodity markets are suffering from initial margin whiplash. This effects both longs and shorts. Shorts in some wild runners have been getting killed and likely do not have a huge amount of free credit left in their accounts to cover the huge margin increases...Ironically, since quite a lot of damage is being done on gaps, which are the enemies of a pyramid trading paradigm since stops are meaningless when the gap happens, the reinvested profits in the long positions are evaporating fast. So, we now have a situation where there are enough people both long and short being forced to close positions that volatility will be high and many will confuse the chaotic deleveraging with directional trades. There will be many fakeouts because of this...Ultimately this type of volatility leads only one place...deleveraging - and that translates to smaller positions and fewer players and ultimately lower and more abberant prices. The effects will likely be contagious...
