Stocks aren’t the only risk assets falling this week.
Rebar, Corn, and Cotton are posting multi-year lows. Dr.Copper is slipping below four bucks. And our short cattle trades are working.
But as most commodities slide, one area (aside from precious metals) is finding its feet.
Notice the CRB Index is carving out a two-year base while our equal-weight index hits its lowest level since early 2021:
The disparity between the two indexes comes down to their construction.
We weigh 33 commodities equally for our index, so rebar futures carry the same weight as crude oil.
On the other hand, crude comprises almost a quarter of the CRB Index.
These stark contrasts reveal two pertinent themes: broadening weakness among commodities and emerging relative strength from energy.
Our index captures the failed breakouts and fresh breakdowns in grains, livestock, and base and industrial metals.
Perhaps Dr.Copper had it right all along.
Meanwhile, the CRB draws upon the near-term crude oil and natural gas rallies.
You can also see energy’s relative strength on ratio charts.
Check out energy contracts finding support at a shelf of former lows versus the broader commodity space:
A relative bounce higher for energy makes sense at current levels. But remember, most of the commodities in our equal-weight index are falling under pressure.
Despite energy’s relative strength, crude and its distillates are far from triggering buy signals on absolute terms.
Nevertheless, the energy sector tends to perk up as stock market rallies stall, especially during the current cycle.
Take a look at this oil and gas name breaking out to new all-time highs this week…
COT Heatmap Highlights
Commercials extended their smallest net-short position for RBOB gasoline in three years.
Commercial's net-long exposure to cotton futures pulled within 1,500 contracts of a historical record.
Commercial hedgers flipped short the Japanese yen, posting a fresh three-year extreme.
