From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley
The markets are a mess and have been a mess for months now.
Risk assets are under pressure as the USD strengthens and overhead supply thwarts potential rallies.
Yet, we continue to find pockets of strength in both stocks and commodities.
We’ve said it time and time again during the past several months...the markets are a bifurcated, choppy mess!
But during these challenging periods, identifying areas that are bucking the trend can prove valuable over intermediate- and longer-term timeframes.
Basically, the assets holding up the best or even breaking out while the broader market is trendless are likely to be your future leaders.
Let’s take a look at one area of the market doing just that!
Here’s a chart of the ASC Green Revolution Index:
It’s an index comprised of commodity futures and ETFs designed to capture the performance of the emerging group of “green metals.”
What are “green” metals? Think of metals used in wind turbines, lithium-ion batteries, solar panels, and other renewable energy sources (metals like lithium, cobalt, nickel, copper, and rare earth metals like manganese and neodymium).
These are the metals that are going to help meet the growing energy demand.
Oh...and they’re breaking out to new highs too!
We’ve pointed out the resilience in base metals as procyclical areas of the market have come under fire.
And yesterday, we highlighted trade setups in the Lithium EFT $LIT and Rare Earth Metals ETF $REMX as both are breaking out of big bases to multi-year highs.
It’s simple. Green metals are leading the pack right now.
Look at their performance during the last year compared to our equal-weight precious metals and base metals indexes. It’s no surprise that precious metals aren’t in the race.
Looking at the performance over the trailing twelve months, this basket of assets are the clear leaders, and we've only seen their outperformance accelerate over the past six weeks.
Green metals have our attention right now as they are exhibiting the kind of strength and resilience that are characteristics of future leadership.
It’s also interesting to note that industrial metals, in general, continue to push higher while the more defensive precious metals can’t catch a bid. This speaks to healthy risk appetite within the commodities complex.
The bottom line is this is an area we want to be leaning on to express a bullish thesis in commodities markets...definitely right now, and potentially for years into the future as this secular growth trend is likely just in its early innings.
As always, let us know what you think. We love hearing from you.
Thanks for reading, and be sure to download this week’s Commodity Report below!
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