Commodities Weekly (03-19-2021)

From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley

Overall, Commodities came under pressure this past week.

We noticed many markets running into resistance at former highs, and this was most prevalent in the Energy sector, with the exception of Ethanol.

Other areas of the Commodity space like Grains and Softs also showed short-term weakness. However, there were still some bright spots as usual.

Two of the markets that really stood out were Lean Hogs and Palladium.

First up, Lean Hogs broke out of a 6.5-year base, clearing its pivotal 2019 highs.

You know when Livestock futures are breaking out of half-decade long bases that Commodities are most likely in a bull market.

I believe the saying goes, "the bigger the base the higher in space."

If that's going to be at all true then we want to be buying Hogs above 98 with a target of 133.

Palladium also registered a nice move this week as this long-term leader in the Precious Metals space broke out of a 12-month range to fresh 52-week highs.

This most definitely bodes well for their shiny metal peers. These new highs from the group's leader aside, when we consider other factors such as the bullish action from the Silver/Gold ratio, the outperformance from more risk-on metals like Silver and Platinum, and the fact that even laggards of the group like Gold and Gold Miners continue to hold key support (and remain in primary uptrends) - the weight of the evidence definitely suggests we don't want to give up on this space just yet.

In fact, we'd argue it's just the opposite. With risk so well-defined in so many of these areas, this is as logical a place as any to be looking for opportunities.

With Palladium just a stone's throw away from fresh all-time highs, we want to be buyers on strength above this 2,790 level with a target of 3,310 over the next 1-3 months.

You can also read more about our recent trade idea in Gold Miners here.

One of our favorite charts to analyze for a read on precious metals is our equally-weighted custom index of the group. Here's a look at what that looks like today:

Long story short, as long as price remains above those former highs of 590 the risk is to the upside for these shiny rocks. Although if we're below there, we're better off putting our money to work in other places.

As for Commodities as a group, while many risk-on areas have corrected through time or price at key levels lately, the primary trend remains very much intact... and higher.

Thanks for reading and let us know what you think!