Velocityshares Daily 2X Vix Medium Term (TVIZ)

[gldtimer]

Backwardation--Bullish or Bearish.

Read the article of a year ago, saying that because commodities were in backwardation, 2014 would be a strong bull market. Well, we know that call was as wrong as wrong could be.

http://www.indexologyblog.com/2014/01/03/backwardation-is-back/

So is the author wrong, is backwardation bearish? Not necessarily, it could be very bullish. So how can it be both? It depends upon the reason for backwardation. A point the author totally neglected to point out.

Let me explain.

Take a piece of paper and draw a horizontal straight line. At the end of the line on the left draw up a vertical arrow head and label it...current tight supply, high demand now and in future, as the author stated the 2014 market was saying commodities were then in.

The curve is now negative and is in backwardation.

Now draw another straight line and put a vertical arrow head at the end on the right and label it...current massive over supply from low demand now and still lower demand in future!

The curve is now negative and is in backwardation.

So which arrow head is the market making, the one on the left or right...LOL

The world is going into backwardation, and it's not the good kind!