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November 2014 Editor Comments

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Physical Commodities


In January 2014, physical commodities personified by the CRB Index
made a small double bottom at 272 (with one in November at 272) which
was also a higher double bottom with an even more significant one
in June 2012 at 267.  The Index then rallied hard into March/April
before struggling to reach 313 in June 2014.

And then the US dollar took off.  The US$ Index found reinforced support
at 79.77 and set off on a so-far 13-week march higher that reached
86.33 on the last day of the third quarter and US fiscal year.  That
8.2% rise in the US$ drove commodities back down into the last full
week of September to below 277 an 11% decline.

Most commentators, many perhaps looking at other commodity indices
composed or weighted differently, saw commodities as being in a new
bear market.

And certainly they were during the third quarter.  Grains and soybeans
fell apart under the weight of not only the dollar but also enormous
crops.  Silver made new lows on the last day of the quarter as crude
oil plunged over $3/bbl.

But, prior to the last day of September, the CRB itself had rallied for several days.

(Find the chart at stockcharts.com.  Go to Free Charts and type in CRB.)

We had better prepare to......

Trade 'em,

Jerry Toepke

Last Updated on Monday, 27 October 2014 16:29
 

October 2014 Editor Comments

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Physical Commodities

Commodities recovered moderately to end August but on light volume.  On the first trading day of September, metals and energies were hit and sold hard.

What now?

Gold has usually turned up in September and into October.  European jewelry manufacturers return from August vacations to face immediate and traditonal demand from India, then the West, and finally China.  But platinum has usually outperformed gold for months.

In energies, the shoulder month of September has tended to be one of accumulation for natural gas, crude oil, and heating oil as cooler temperatures approach and the industry prepares for winter.

Wheat has already been harvested but winter wheat planting gets underway.  Plants will need snowcover, but Australia and Argentina harvest in December/January.  Corn and soybean harvests get under way in September and then accelerate into October.  Supplies will be huge.  How much have price declines already discounted?

Meats may or may not have peaked, but much time will be required to rebuild both herds.  Prices are likely to remain relatively high for some time, offering many trading opportunities.

Will the US dollar continue to climb as the Fed ends QE?  Will that be anticlimactic?

Trade 'em,

Jerry Toepke
Last Updated on Wednesday, 03 September 2014 11:40
 

September 2014 Editor Comments

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Dow Jones-UBS Commodity Index

Well, where do we go from here?

First, they apparently killed the old standby, the CRB Index, which had been around for many years to reflect inflationary/deflationary pressures on the economy from the commodity sector. Then they did away with the CCI, and then the Dow Jones-UBS all based on commodity futures which are particularly sensitive to such pressures.

This month we present the CRB-BLS Commodity Index (BLS stands for Bureau of Labor Statistics) on page 74. There you can see its components, many of which are foreign to futures traders, and read about its development. We are not sure whether we will continue with it, find another index, or drop it altogether.

Nonetheless, the weekly and monthly charts can generally illustrate price pressures from commodities now. You can see the bottom at the millenium, the powerful rally into 2008, the sharp plunge thereafter into December 2008, the rise to new highs into 2011, the pullback and the effort to stabilize since.

Although a chart of different commodities, its features are similar to those of the previous commodity indices ... caught between support and resistance. It is not (yet) plunging. Is it (bullishly) consolidating? What's a trader to do? Maybe be ready to.....

Trade 'em,

Jerry Toepke

Last Updated on Monday, 04 August 2014 12:10
 

August 2014 Editor Comments

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Dow Jones-UBS Commodity Index

R.I.P. First, we lost the old CRB. Then we lost the Reuters-CRB. And now, as of June 30, we have lost the Dow Jones-UBS Commodity Index as an analytical tool. It left us, as is almost always the case with charts, with a mixed picture. In other words, bulls can make an argument but so can bears.

The bearish case assumes 2008 was the ultimate, secular peak. The weekly chart still does not prove the downtrend begun in 2008 (or 2011 in the CRB) is over because not even the more minor 2012 peak has been exceeded. Its last trade at 134.63 only barely off the low of 122. Further, the Index closed out by collapsing below its 50-day moving average. Two bearish head-and-shoulder formations are apparent.

The bullish case assumes the secular commodity bull begun 1999-2001 remains in effect. The recent double bottom at 122 was far above the low of 2009 at barely 100, and it drove higher out of that low and then blew through all major downtrend lines. Have the lows of 2009 and 2013 and the 2011 peak in between simply been a major correction? Will the US dollar break down?

What's a trader to do? Maybe be ready to...

Trade 'em,

Jerry Toepke

Last Updated on Thursday, 03 July 2014 05:25
 

July 2014 Editor Comments

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Dow Jones-UBS Commodity Index

In recent years, the Commodity Research Bureau quit calculating their eponymous commodity index. Now, as of the end of June, the Dow Jones-UBS Commodity Index will no longer be calculated. Will it be a contrary indicator?

Again, after commodities peaked as a sector in 2011, the index fell (retraced?) into November 2013 to a low of 120.00. After bouncing for a few weeks, it returned to retest that low and held 122.22. The recovery since carried into April to as high as 138.67. In the process, the 50-day moving average (MA) rose over the 200-day the so-called bullish Golden Cross.

But the index was overbought and indicators diverged. The decline since has been orderly and, going into June, was trading below 134.00 but approaching support at the late-March low of 132.68. It was below its 50-day MA but above its rising 200-day near 130 which would coincide with a 50% retracement.

What could give it support or provide resistance? Will gold and silver soon establish major lows and rally? With physical supplies of corn and soybeans tight, how will their new crops be? Planted acreage is large and both crops are getting off to a good start. Will crude oil stay in a range of $100-105/barrel forever?

What's a trader to do? Maybe be ready to....

Trade 'em,

Jerry Toepke

Last Updated on Thursday, 05 June 2014 05:12
 
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