From the Desk of Ian Culley @IanCulley
There’s no doubt about it: Fundamentals drive markets over longer time frames.
It’s a common misconception that technical analysts don’t believe in fundamental analysis.
That’s not true.
Many of us simply chose to follow price for a multitude of reasons. Price always made sense to me, especially since it pays at the end of the day.
Whether you use fundamentals or technicals to inform your investment decisions comes down to philosophy.
Remember, we’re all solving the same puzzle – just from different perspectives…
Check out the dual-pane chart below of the CRB Index and the overall CPI percentage change from a year earlier:
I was shocked at how closely these charts move in tandem. They look almost identical! It makes sense considering inflationary assets such as commodities rise along with inflation.
You can choose to focus on the CPI report or commodities. Whatever floats your boat.
I find it tough to prioritize lagging economic data considering markets are forward-looking, and all available information is baked into price.
Notice both charts peaked in June last year and have been trending steadily lower ever since.
But the CRB Index remains buoyant despite inflation easing last month, according to the consumer-price index (climbing 5% in March, down from a 6% increase in February).
The resilience of the major commodity indexes speaks to pockets of strength beneath the surface, especially in agricultural contracts.
Have you seen jeera (cumin seed) futures lately?...
Up and to the right!
This is a face-ripping rally that looks quite similar to a chart of sugar… or a chart of feeder cattle... or a chart of orange juice...
You get the point.
Yes, inflation is easing. But instead of spending precious time hypothesizing the underlying forces at work for any given market, I’ll study the price action.
After all, we’re trading price.
What do you think? Am I way off?
Do I need to spend more time researching fundamentals – or looking at charts?
Let me know. I love hearing from you!
COT Heatmap Highlights
- Commercial hedgers hold a record-long position in palladium.
- Commercials tacked on additional long exposure to lean hogs, falling within one percent of their largest position in three years.
- And commercials added another 3,000 contracts to their short position in cocoa, registering a three-year extreme.
Click here to download the All Star Charts COT Heatmap.
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