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May 2014 Editor Comments

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Dow Jones-UBS Commodity Index

Are commodities still in a secular bull market?

Charts of the Dow Jones-UBS Commodity Index suggest at least three potentially bullish clues:

(1) On a daily chart, the Index made a small double bottom at 122.00 in November '13 and then at 122.22 in January '14 both about 50 points off the high at 175 in 2011; going into those lows, movement had become less volatile, typical of lost interest and bottom activity.

(2) In February, the Index blew through the downtrend line that contained it since that high in 2011.

(3) By early March, with price already well above it, the 50-day moving average crossed over the 200-day in the so-called Golden Cross.

If that is a significant low, it is higher than the major low in 2009.  Does that suggest completion of a multi-year correction?  If so, is there potential for massive commodity inflation?

It has already shown up in cattle and hogs both at or near all-time highs.  Are grains and soybeans finished trading lower?  (Oats made an all-time high recently.)  What might happen to food prices if California's fertile valleys don't get water this summer?  Several of the softs
are jumpy.  What will metals do?

What's a trader to do?  Should he be ready to....

Trade 'em.....

Jerry Toepke


Last Updated on Wednesday, 02 April 2014 10:03
 

April 2014 Editor Comments

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MRCI's 2013 Hypothetical Results are now available!

MRCI's annual performance reviews in which are tabulated and plotted the hypothetical results of all strategies presented in 2013.  Strategies are broken down by complex,
with win/loss numbers and net profit/loss shown for each, along with cumulative totals.  Results are given for seasonal trades, seasonal spreads, and the Weekly Spread Commentary, as are hypothetical equity curves for each not only for 2013 but also since inception.

Dow Jones-UBS Commentary

Is a secular bull market in commodities resuming?  Has an approximately six-year cycle in commodity indices begun to rise?  See page 74 and lows in 1986, 1992, 1999, 2005, 2009, and maybe 2013-14.

The Dow Jones-UBS Commodity Index has surged through the downtrend line drawn through highs in 2011 and 2012.  Cattle and hogs are making new all-time highs.  Cocoa has trended up.  Have you looked at coffee?  Is that a multi-year bottom in sugar?  Soybeans are at multi-month highs.  Crude oil is above $100 and natural gas $5.00 despite huge new US supplies.  Downtrodden metals have been getting a bid.  Will erratic weather affect US crops?

What's a trader to do?  Should he be ready to....... 

Trade 'em,

Jerry Toepke


Last Updated on Wednesday, 26 March 2014 12:43
 

March 2014 Editor Comments

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Dow Jones-UBS Commentary

Is the Dow Jones-UBS Commodity Index building a new base?

(Follow this Index at http://stockcharts.com; click on Free Charts, type into the box that appears under Create a SharpChart the symbol $DJAIG.)

It appears to have settled into a narrow sideways range, having spent the last 3+ months boxed by 128 and 122.  Closing January at 126.12, it lies above its 50-day moving average at 125.40 but below its 200-day at 127.85.  Daily MACD and 14-day RSI are neutral.  Weekly indicators are slowly rising, having already displayed bullish convergences at the November low.

What are its seasonal and fundamental prospects?  Energies tend to rise from March/April as gasoline and heating oil supplies are accumulated or replenished.  Natural gas supplies also are at their nadir then.  Will there be another cold snap before winter ends?

Winter wheat is dormant, and corn and soybeans are yet to be planted.  Could California's drought be ominous?  Gold and silver tend to trade sideways/lower through spring.  Are they also building a sideways base?

If the stock market cracks, might some of that money move back into hard assets?  Will the Fed's tapering work or create chaos?  What will the US dollar do?  There is enough uncertainty to....

Trade 'em,

Jerry Toepke



Last Updated on Tuesday, 04 February 2014 07:10
 

February 2014 Editor Comments

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Dow Jones-UBS Commentary

As reflected in the Dow Jones-UBS Commodity Index, physical commodities have suffered a miserable 2+ years.  Ever since mid 2011, by which time this index had retraced about half its 2008-09 plunge in reaching 175, the DJ-UBS has steadily eroded.

(Follow this Index at stockcharts.com; click on Free Charts, type into the box that appears under Create a SharpChart the symbol $DJAIG.)

By November 2013, the index had fallen back to 122 not far above its 2009 low of about 102 (after falling from its 2008 high of almost 240 itself a triple of its 1999 low).  Now, if one is really bearish, one can see a head-and-shoulders continuation pattern with the head at 175 and the neckline at about 122 which would suggest a measured objective would be about 69.  Practical?  That would be a new 30+-year low.  One would need to be an ultra-uber-bear.

In contrast, perhaps the index is making a higher bottom.  Once can draw tight fan and downtrend lines to see that not much would be required to break the downtrend.  In fact, one could argue that all trading of this last 16 months has been sliding down the top of a broken downtrend line.  Given the enormous supply of money created in the last couple years, if the velocity of money began to rise, it would be crucial
to be ready to...

Trade 'em,

Jerry Toepke

 P.S. MRCI publishes new volumes in its series of special reports each year.  Hottest off the press.... 2014 Historical Lumber: a 60-page volume of seasonal analysis for lumber futures, with seasonal patterns for each delivery and several spreads; with 22 seasonal and spread strategies for year-round ideas.
Last Updated on Saturday, 04 January 2014 07:27
 

January 2014 Editor Comments

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Dow Jones-UBS Commentary

Readers may notice the new heading immediately above.  It no longer says "CRBside Commentary" due to the unfortunate demise of the much revered CRB Index.

On page 74, however, you will now find the Dow Jones-UBS Commodity Index, with brief comments explaining the goal of its design; a list of its components and weightings for each sector; weekly/monthly charts.

This index is reweighted and rebalanced annually.  You may note differences between the old CRB and this DJ-UBS index.  For example, Energy comprises 36.69% of the index in contrast to only 17.65% of the old CRB.  Commodities such as orange juice, cocoa, and platinum are not members of the DJ-UBS but Brent Crude Oil, gasoline, Kansas wheat, zinc, aluminum, and nickel are.

Turning to charts, this Index meandered sideways until the turn of the century and then broke upwards.  Reaching its all-time high at nearly 240, it plunged into early 2009 to almost 100 back to its breakout level and slicing almost 60% of its value.  Despite recovering half way back up to about 175, it is now declining again.

A pure chartist might notice that it has now formed and broken down from a head-and-shoulders.  If so, the price objective would be about 75 approximately the lows from 1985-1999.  Is that possible?

It is crucial to be ready to......

Trade 'em,

Jerry Toepke


Last Updated on Thursday, 05 December 2013 12:32
 
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