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April 2022 Editors Comments

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Physical Commodities

Wow!  Inflation!  And then war!  No wonder commodities have taken off.

Remember that the CRB Index made a multi-decade low in April 2020 at 101.48.  It ended February 2022 at its highest since then 269.07.  The uptrend has progressed  steadily and persistently, with little correction along the way.  Yes, it is overbought on both daily and weekly RSI and has been for a few weeks.  The current level is already more than 40% back from its 2020 low to the all-time high at about 474.

But now the FED, whom everybody assumed was going to cool inflation with just a few rate hikes, is caught in a vise.  Inflation keeps rising, but, with the war, can it hike as much as it might think otherwise necessary?  Will too much destabilize too many financial markets?  If it doesn't hike enough, will inflation accelerate?

Crude traded at $100, Brent at $105.  Corn ($7.1875) and soybeans ($17.65) have left limit trades that are now targets.  Gold traded up to $1976.  All backed off right away but just as quickly rose again.

And corn soybeans, and cotton are not even planted yet.  Bonds can't decide what to do up 2~00 and 2~00.  And what about the dollar?

What can you do but ...

Trade 'em,

Jerry Toepke



 

March 2022 Editors Comments

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Physical Commodities

Non-transitory inflation but overbought CRB?

Like a compressed spring, a multi-decade low in the CRB in April 2020
at 101.48 released its energy to a high and close on January 31, 2022
at 255.12.

(Readers of the monthly hardcopy report can see how dynamic the move
on page 68.  The low is not as severe as in the old CRB for futures,
but you can see it has now made a +30-year high.)

Now what?  With the CRB overbought, one might expect a bit larger
correction than any during January, perhaps more in line with ---  or
even bigger than --- that in November/December.  There may be an interest
rate hike in March, and the FED said it was going to taper its mortgage
purchases.  All meant to tighten liquidity.

But there are rocks and there are hard places.  How will the stock
market and the economy react to too little or too much tightening?  Would
a war affect energy?

How about food prices?  South American
projections are already being lowered.  What if US weather does not
cooperate this growing season?  In the Futures Highlight, did
soyoil break out of a massive bull flag on the weekly chart?

Are metals going to remain in a sideways range forever?  What will
the US dollar do?

What can you do but ...

Trade 'em,

Jerry Toepke



Last Updated on Sunday, 27 February 2022 14:29
 

February 2022 Editors Comments

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Physical Commodities

Transitory inflation?  We may soon find out.

The CRB made a historic bottom at 101.48 in April 2020 as the pandemic panic crushed commodities (remember longs willing to pay shorts more than $40/barrel to accept deliverable crude oil?).  It then came roaring back, by this past October reaching 241 a Fibonacci retracement of 38% back toward the all-time high of 466 in June 2008.  In only 18 months!

Along the way, the term transitory inflation entered the discussion.  Of course, as soon as it did (remember contrary opinion?), the CRB corrected modestly back to about 232.  It then rose again into late November to 238 only to drop precipitously to 218 by December 1 as the FED apparently became convinced inflation needed attention.  Despite that, the CRB returned to 235 the last week of 2021.

So what will 2022 bring?  The FED is now expected to end their bond and mortgage buying program and to raise rates thrice.  But each time only 0.25?  So by the end of 2022 the FED funds rate may be 1% only half their own target inflation rate of 2%?

How will that affect the US dollar?  Will it adjust?  Will the CRB retrace more than 38%?

What can you do but ...

Trade 'em,

Jerry Toepke



Last Updated on Wednesday, 19 January 2022 11:24
 

January 2022 Editors Comments

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Well, of course.  All it took was for the media to focus on non-transitory inflation.  As soon as the public became fully aware that there might be more to it, commodities and the CRB began a sharp correction(?).  How's that for a massive contrary opinion signal!

After running higher from its historic 2020 pandemic panic low of 101.48 (remember deliverable crude oil at -$40?), the CRB Index reached 241 in late October.  It then sold off modestly into early November (to 233) before bouncing to retrace 60% at 238.

As public discussion continued to feature inflation (how much more holiday meals cost, opening up the US oil reserve), November turned really ugly.  In concert with risk-off selling in the stock market when a new COVID variant was found, commodities plunged.

Was it a collapse - or an intensified correction?  Crude oil fell $10, gasoline and heating oil both more than 28 cents - in a day!  After a quiet day, the CRB plunged again on the last day of the month.  In just 3 days, the CRB declined from 238 to 219 - almost 8%!

Now what?  The CRB has relieved its daily overbought condition on RSI by reaching oversold levels; the weekly
has been neutralized to 50.

What can you do but ...

Trade 'em,

Jerry Toepke

 

December 2021 Editors Comments

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Physical Commodities

A new high for the CRB in October!

But the Index ended October not only overbought in both daily and weekly time frames but with daily indicators already rolling over.  Are the markets afraid the FED will (over)tighten at their meeting Nov. 3?

Yield curves have been flattening, suggesting short-term rates may firm and slow the economy enough to loosen rates at the long end.  The last business day of October offered mixed signals:  the US dollar soared 0.80 cent, bonds rose 0~20, metals sank --- but the stock market made new highs.  Crude rallied modestly as did corn and soybeans.

So, now what?  Many assume the FED may need to signal a tapering of their bond/mortgage purchases and/or the need to firm rates next year in order to avoid more-than-transitory inflation.  But how much can they tighten?  How would the stock and housing markets react to rates firming much?  How does the US finance its debt if rates rise much?

So, there may be a bump in the road, but the FED seems disinclined and perhaps unable to raise rates and/or tighten much.

What can you do but ...

Trade 'em,

Jerry Toepke

Last Updated on Monday, 01 November 2021 09:32
 
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