Energy Commodity Out-Performance Continues
The CRB Index which is composed of 39% Energy Commodities, is hitting its highest levels since late 2015 versus the CCI Index which equally weights the 19 Commodities in the index. This fresh breakout continues to suggest that Energy's out-performance is here to stay.
Looking at Crude Oil itself, prices continue to consolidate in this range just below our tactical price target of 76.80, setting up for a potential breakout toward 85. Momentum remained in its bullish range for the entire time, which we take as further evidence of continued strength to come.
Heating Oil is in a similar position, hitting its highest levels since early 2015. Momentum remains overbought and prices continue to trend higher above a rising 200-day moving average. A breakout above 2.41 would target former support near 2.83.
While Gasoline has been a bit of a laggard, it's now lifting off support at 1.95 and heading back toward its May highs of 2.29.
Natural Gas continues to be rangebound, but is perking up and hitting 7-month highs. It's also worth noting that momentum hasn't been oversold since early 2017, so despite the lack of price progress, we've not seen an overwhelming number of sellers on moves to the downside. This situation reminds me of Airlines and Transports for most of this year. If Natural Gas is the worst component of Energy and it's flat, how bad could the space be?
The CRB Index also has a 41% weighting in Agricultural Commodities, which have been struggling as a group for a very long time. Prices are below a downward sloping 200-day moving average, consolidating near 52-week lows and momentum remains in a bearish range. Until there's some broad-based improvement in this space, it'll be tough for the CCI Index to reverse its downward trend relative to the CRB Index.
The remaining ~20% of the CRB Index is comprised on Precious and Base Metals, which we discussed two weeks ago. While there's been some opportunity for a counter-trend move in the short-term, long-term there's still little evidence suggesting a sustainable move to the upside is in the cards for the metals space.
The Bottom Line: Energy Commodities continue to out-perform the rest of the space, and the evidence we've seen over the last few months suggests that this is likely to continue. Our price targets and risk management levels are well-defined in the futures themselves, however, we're also seeing many of the Energy stock ideas we discussed for Premium Members earlier this month working.
Despite all of the noise, we'll continue to follow price, monitor the data as it comes in, and adjust our thesis as the weight of the evidence shifts.
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Allstarcharts Team