Agricultural Commodities Have A Long Road Ahead

JC Parets
September 3, 2020

From the desk of Tom Bruni @BruniCharting

Two weeks ago on "What The FICC?" I discussed the potential long-term trend change in Agricultural Commodities and the vehicles to take advantage of it.

It's true that August was a good month for Lean Hogs, Corn, Cocoa, Soybean Oil, and others, but in this post, I want to temper expectations about what we should expect going further.

Let's start with Lean Hogs, which are up over 20% in the last month. Sounds pretty great right? Well, it does until you look at the longer-term picture.

Prices are still near a downward 200-day moving average and stuck in the middle/lower end of a multi-year range. Momentum has also failed to reach overbought territory. Overall, it's a hot mess.

Click on the chart to enlarge view.

The same can be said for Cocoa. Nice performance over the last few months, but what progress has it really made?

The action in Soybeans is constructive and what we want to see more of. Prices have emerged from their range to new multi-year highs, but still have a flat 200-day moving average, which will be a headwind in the near-term.

So now we wait to see if prices can build on this positive development. Do they consolidate ABOVE former resistance at 940 and then continue to the upside once the moving average has begun to slope higher and catch up with the recent action? Or is this going to turn into another failed breakout and whipsaw like we've seen over the last four years?

That's the question we await an answer to.

As a group, these Commodities continue to make upward progress, but that progress can be deceiving. Until each of them can form sustainable breakouts on their own and begin trending higher...we're going to have to remain patient and selective when participating in this space.

Agricultural Commodities still have a long road ahead before they're in the clear.

Thanks for reading and please let us know if you have any questions.

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