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June 2017 Editors Comments

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Physical Commodities


Ever since April 2016, the CRB Index (go to stockcharts.com; click on Free Charts; in the box under Sharp Charts, type in $CRB) has been trading in a range mostly 180-196.  At the end of April, it was testing the bottom of that range again.

It did so as the US dollar remained at or near its five-month lows and barely holding onto its 200-day moving average.  Crude oil remained weak, in the middle of its multi-month range of $43-55.  Gold was suffering a two-week long decline, but silver was barely holding multi-month lows just under $17.

The most recent bright spots for commodity bulls were cattle and suddenly? temporarily? grains.  Bull spreading was a feature in cattle, with cash over the nearby and successive delivery months racing higher after expiry of that preceding.  Only weeks after the USDA had reported winter wheat acreage as the least since the 1930s, primary hard red winter wheat growing states received as much as 12 inches of snow on April 30.  How much damage will there be?  Corn planting has been a little slow, and soybean and cotton planting just underway.

What will Mother Nature do?  How about the US$?

Maybe we should be ready to ...

Trade 'em,
Jerry Toepke
Last Updated on Tuesday, 02 May 2017 11:44
 

May 2017 Editors Comments

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Physical Commodities


Commodities have become an asset class generally ignored by investors.  Does everybody still want stocks?  Really?

Yes, yes - inflation is/seems low.  Interest rates are low.  Tax cuts are (supposedly) on the horizon.  World GDP growth may be slow but is/seems steady.

Major commodities seem overburdened with supply.  Way too much oil - with the potential for much more on any price rise.  Too many soybeans on hand, enormous South American crops being harvested now, potentially enormous US crop.  Plenty of corn.

Plentiful supplies of wheat, but wait what's this?  All US planted wheat acreage estimated to be the lowest since records began in 1919? US corn planting is just barely getting started, and soybeans
are a month away.  Weather can be shall we say variable.

What if the US dollar weakens?  What if the US stock market weakens?  Where will money go?  To the bond market?  Really?  When the Fed wants to raise rates?

Do wise investors buy markets that everybody else wants to buy?  Or do they buy markets that nobody is even thinking about?

Maybe we should be ready to ...

Trade 'em,

Jerry Toepke
Last Updated on Wednesday, 05 April 2017 05:28
 

April 2017 Editors Comments

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Physical Commodities

While the stock markets soar to new highs seemingly every day, commodity indices have been as dull as can be.  To wit:  For the last three months, the CRB Index has meandered sideways between 190 and 196.  Although there is much discussion of oil prices, they have been stuck in a narrow range.  Corn, soybeans, and wheat have been unable get out or their own way.

On a daily chart, the CRB Index has for three months now traded mostly between 190 and 196.  No wonder commodities are ignored as an asset class.

However, consider that on March 1 the 50-day moving average was 192, which was over the 200-day at 188.  The Full Stochastics had curled up from below 10 to 23 over 16.  Those on the weekly chart had relieved an overbought condition, although there were still pointed lower.

Fundamentals all sound negative.  Grains all in overuspply.  Crude and products with too much supply and production capacity.  Metals in fear of an interest rate hike.  A world economy with too much supply and not enough demand.

But a lot of money.  US, European, and Japanese central banks have ceated money in the hope of generating a little inflation.  What if it does pick up?

Maybe we should be ready to ...

Trade 'em,

Jerry Toepke

Last Updated on Thursday, 02 March 2017 06:54
 

March 2017 Editors Comments

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Physical Commodities


Although unable so far to break out decisively, the CRB Index (go to stockcharts.com, click on Free Charts, and enter $CRB) appears on a weekly time frame to be building out an inverted head-and-shoulders bottom.  If so, the head lies at 154.85 and the down-sloping neckline, drawn from the minor peak at 203.68 in October 2015 to that of 195.88 in June 2016, has already been breached.  The month of January closed at 192.04, and the first day of February closed at 194.34.  Has the market simply spent the last 9 weeks in an upward rounding  consolidation pattern?

If so, is it waiting for a catalyst?  What might that be?  US dollar weakness?  A stock market decline?  International incident?  Domestic unrest?

Supply seems to be everywhere.  Lots of corn, wheat, and soybeans.  Plenty of oil and natural gas.  How could prices for these commodiites go higher?  One might think that some macro-event would be required to drive prices much higher.  It will, of course, soon be planting time for corn and soybeans, although the Southern Hemisphere must get their harvests in.

Crude oil has held up well, and seasonal patterns suggest buying continues into spring ahead of the upcoming vacation and driving season.

Maybe we should be ready to ...

Trade 'em,

Jerry Toepke
Last Updated on Thursday, 02 March 2017 06:55
 

February 2017 Editors Comments

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Physical Commodities

Will 2017 be a happy new year for commodities?

Again, the CRB Index made its all-time high in 2011 at 688.  It then fell to 154.85 in January 2016 actually lower than the bottoms (near 183) in 1999-2001 that launched the bull market of 2001-2011.

The Index surged up into June to 195.88.  It has since traded sideways, hovering above the 50-week moving average (ma).  In doing so, it has slowly and gently been curling said average higher.  The Index closed the year 2016 at 192.51 generating a yearly reversal above the 2015 close at 176.27.  That left the CRB in bullish alignment, with price above the 50-day ma (188.26) which was above the 200-day ma (184.95).

Now what?  Known fundamentals seem bearish.  Though several major oil producers agreed to production limits, financial pressures may induce producers to cheat.  Further, price has approached levels at which US frackers could reopen some of their spigots.

World supplies of grains and soy are plentiful, and major producers and exporters are preparing to harvest enormous new supplies.  US producers may be right behind with massive planting intentions.  Cattle and hogs have bounced hard, but reports of plentiful supplies of pork and beef in cold storage may limit any upside.

Maybe we should be ready to ...

Trade 'em,

Jerry Toepke


Last Updated on Tuesday, 03 January 2017 12:56
 
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