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January 2015 Editor Comments

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Physical Commodities


First, a couple of housekeeping items.  Read a Fond Farewell to Howe's Limit Rule on 66, where we have for years discussed and published data on limits.  Exchanges have essentially eviscerated
limits.

Secondly, we introduce Brent Crude Oil as a major futures for seasonal analysis.  It is actually the pricing standard used by most of the world, is traded on ICE, and enjoys similar liquidity as crude light.

Did commodities finally hit a major bottom?

The facts, m'am.  Just the facts.  Admittedly on light volume, a decision by OPEC not to cut oil production collapsed many commodities on Friday, November 28.  On November 30, the Swiss rejected a referendum which would have required their national bank to purchase 1500 tons of gold.  More collapse?

No.  On December 1, gold and platinum retested their lows and silver made a new low and all three reversed with huge daily ranges and huge volume.  Crude oil followed through to make a new 5-year
low and reversed to close $3 higher.

Wheat had already been trading with curious strength, and corn and soybeans were trading gentlyhigher since record harvests.  Did commodity indices make at least three- and six-year cycle lows?

I don't know, but be ready to ...


Trade 'em,

Jerry Toepke


Last Updated on Thursday, 04 December 2014 13:22
 

December 2014 Editor Comments

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Physical Commodities


For daily and weekly charts of the old CRB and for the CCI commodity indices, traders can go to the web site stockcharts.com.  Then go to Free Charts and type in either $CRB or else $CCI.

Commodities continued their four-month slide, with each of those indices losing more than 11% since June 30.  The culprits?  First, the US dollar, which gained more than 9% during those four months.  Second, good weather, which helped drive major crops uniformly lower:  soybeans over 9%, corn 11%, wheat nearly 8%.  Third, US shale oil and a Saudi decision to pump more oil combined to help drive crude oil almost 24% lower!

The buzzword now is deflation not disinflation, but outright deflation.  The Fed ended QE and handed to baton to thr Bank of Japan, which announced a huge new effort to stimulate their economy by buying assets and driving the yen lower, and thus the US dollar up.  (Will that work?  Or will Japanese savers see it as a desperation  move and hold even tighter to their yen?)

What now?

Most commodities are, as of October 31, grossly oversold within bear markets.  Thus, without some kind of black swan, one would think the best they could do for now is to mount moderate relief rallies.

No matter what, we must be ready to ...

Trade 'em,

Jerry Toepke
Last Updated on Monday, 03 November 2014 17:16
 

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
 
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