For many markets, a change from the "normal" condition of contango to backwardation signals a shortage of supplies and the beginning of a bull market while the change from backwardation to contango signals the end of the bull market.

We can use the Open Contracts Spectrum program to generate the following chart and quickly see which markets are in backwardation and which are in contango.

Both Oats and Kansas City Wheat markets appear to be experiencing shortages. We can use the Open Contracts Charts program to see how long these conditions have existed. Let's look at Kansas City Wheat. Here we see that back in September all the contracts were in contango (notice that the colors occur from top to bottom in the same order as in the legend at the right). But, in October the KW2005H contract started moving higher than the KW2005K contract and by February was higher than all the contracts shown. This preceded what looks like the beginning of an uptrend.

All traders but especially scale traders need to know where the markets are with respect to their historical ranges. Using the Price Range Percent program we can see this across the markets at a glance. This shows that the energies, interest rates and metals are near their 20-year highs while the grains and softs are in the lower ends of their ranges. It also shows that the energies and softs & fibers have larger ranges than interest rates or metals.

Profitable trading opportunities can exist when the normal relationships between related commodities are out of line. Using the Group Price Charts program we can spot divergences within a commodity group. The marked area shows natural gas making a larger upward move than the rest of the group in May and then coming back into line within a couple of months. A trader could have profited from this divergence (assuming that it was considered a reliable enough relationship to base a trade on) by establishing a long crude oil/short natural gas spread.