From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

The best opportunities are the ones with the most clearly defined risk characteristics and most favorable risk/rewards.  

This summer, Minneapolis Spring Wheat was offering us a trade set-up with both these qualities. Price had just resolved higher from a near decade-long base and was trading at its highest level in 8 years. We were buying the breakout.

Fast forward to today and our initial profit target has been met and we’re locking in gains.

In today’s post, we’ll take a step back, review our trade, pinpoint current levels of interest, and discuss how we’re managing the position moving forward. [Read more…]

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley      

Procyclical commodities have attracted all the attention this year as inflation and rising rates have driven prices considerably higher.

But, as we pointed out last week, many of these contracts — Brent crude, natural gas, copper — are running into areas of overhead supply or are already in the process of correcting.

With that as our backdrop, let’s switch gears and focus on an area of the commodity space we haven’t talked about in months.

That’s right… precious metals!

While we’re seeing many leading commodities pause at logical levels of resistance, gold and silver have finally stopped going down and are rebounding off support. Despite trending lower since last summer, they’re still holding above the lower bounds of their trading ranges. We think this basket of shiny rocks is ripe for review.

Let’s take a look around the precious metals complex and see what’s new.

[Read more…]

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

It’s been impossible to ignore the strength in commodities this year.

The CRB Index is up more than 50% over the trailing 52 weeks. During this same period, the S&P 500 is up 32%, and bonds ($TLT) are down more than 8%.

Commodities are the clear leaders.

With breakouts from some of the most commonly observed contracts — crude oil, copper, and natural gas — more investors are coming around to the idea that commodities are a viable asset class.

Now that the buzz surrounding this once-forgotten corner of the market is growing, we’re seeing many commodities run into overhead supply zones. We think it would make sense for these contracts to consolidate here. Following such explosive moves off last year’s lows, some sideways action at resistance would be normal behavior.

Let’s look at a few charts that are at logical levels to digest gains. [Read more…]

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Copper was a critical piece missing from the intermarket puzzle heading into the fourth quarter.

Just last week, copper was testing year-to-date lows and looking vulnerable for a downside break. Meanwhile, energy futures and interest rates were rising, and cyclical and value stocks were getting back in gear.

The mixed signals were impossible to ignore. It’s not likely that the recent breakouts in crude oil and the US 10-year yield would hold in an environment where copper is breaking down.

Dr. Copper is a great leading economic indicator and critical to the global growth narrative. Let’s see what it’s saying. [Read more…]

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Energy is the clear leader in the commodity markets right now. Our equally-weighted energy index is up 13.76% over the trailing month and 6.58% in the last five days.

The emerging strength from this group is supported by a rising rate environment that could be just getting started.

So, crude oil to 100 dollars and natural gas to 9?

Maybe! But before we get ahead of ourselves, there are still plenty of mixed signals and divergences that need to be resolved.

One that stands out is the lack of confirming price action between economically sensitive commodities. Let’s take a look! [Read more…]