Hot Rolled Futures: Wow! What a Month Makes! Boom!

The following article on the hot rolled coil (HRC) and financial futures markets was written by Andre and Jack Marshall of Crunch Risk LLC. Here is how Jack saw trading over the past week:

The bearishness was so thick 1-2 months ago you could cut it with a knife! The steel futures were getting crushed, $480/ST was the low print on Cal ’17, not much different than the spot prints in the $460-465/ST zone. CFR Turkey scrap was sub $200/MT with domestic scrap soon to follow, and demand in the U.S. was dismal (maybe still is for some). My broken record story was that it would surprise and rally! I did know it would rally, I just didn’t know when. I guessed 4^th quarter because inventories were/are so low and buyers would need to move at some point, but a turning point in the New Year was not out of the question (markets can remain irrational a lot longer than one can remain solvent). Having traded a Copper book for 6 years, I know from experience why it’s important to be the contrarian (if you want to make money trading price direction anyway). Markets function normally when there are equal buyers and sellers. They function irrationally when there are more participants wanting to buy or sell. If everyone is/was bearish, then there’s no one to buy it and the market drops to levels to find eventual buyers, levels it can’t sustain, and visa versa on the highs. I have experienced moments when I knew intellectually that giving in to the emotion/fear and closing losing positions would result in the market changing direction right afterward (capitulation), and still had to trade it (losses, or fear of more, can make any rational person do things they don’t want to). Markets are cycles, they always will be no matter the story line or the emotion attached to them (Obama/ISIL/Ukraine/Brexit/Putin/Bernie/Trump).