Michael Gurka may have sounded crazy a month ago when he recommended corn as one of the market's best plays, especially after the commodity had just hit an 18-month low.
CNBC.com
But a month later Gurka's callstands as the best of June, with corn flying up 27 percent since then and, with a weak crop and scorching weather ahead, likely a solid play for some time yet.
So where does he see the next big move in the markets?
Right in the same commoditiesspace, but in gold and oil, both of which he sees reaching pressure points and about to turn lower.
"There's potentially going to be a short squeeze here in metals and energy — gold and crude," said Gurka, managing director of Spectrum Asset Management in Chicago. "If you start seeing crude getting above $93 to $95, that's when you're going to start seeing some pretty good short positions coming in. For gold, $1,625 and north of there, it's mostly the same scenario."
Fundamentals will drive down the prices, Gurka said, basing the belief on the notion that the global economy is in a slowdown mode that will prevent growth-related goods like oil from continuing to rise.
"I'm still really bearish on the economy," he said. "Things eventually are going to start falling apart here."
Data this week backs up the perception that the economy is teetering on the brink of at least a slowdown and perhaps a recession.
The Institute for Supply Managementmanufacturing reading fell below 50 in June, a reading that signals contraction. The Philadelphia Federal Reserve's activity gauge last week also showed conditions consistent with a recession.
Those factors would back up a bearish call on oil as well as gold, which is traditionally seen as an inflation hedge though it has been the beneficiary of a flight-to-safety move as well. Gurka thinks declining economic signs will manifest themselves in trading.
It's worth noting that he's making a short oil call as crude has surged $7 a barrel over the past week.
In a CNBC.com interview, Gurka predicted on June 1 that "the grains are really going to start to shine."
The call turned to be spot-on, as wheat, corn and soybeans easily outperformed an otherwise lackluster commodity group, which gained as whole just 1.2 percent in June, as compared to the Standard & Poor's 500 , which was up 5 percent during the volatile month.
He said corn still could have room run judging by heavy activity in the December contract. On Tuesday's pre-holiday quiet trading day, 50,000 December corn contractschanged hands, Gurka said.
He's not alone in his bullish corn call, though newcomers to the trade may have missed the most dramatic gains.
"We see little in the near-term (apart from a dramatic shift in weather patterns in the coming weeks) that will cull the market’s current bull run," Morgan Stanley analyst Hussein Allidina said in an outlook for clients.
