From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Despite taking a hit in recent weeks, commodities have remained resilient.
Buyers are working to absorb overhead supply at some key levels. We’re seeing this kind of action in commodities across the board — from industrial and precious metals to energy and even agriculture. We’re seeing prolonged consolidations in some of the most important contracts, such as crude oil, copper, gold, and soybean oil.
The point is simply that most commodities are correcting through either price or time. Some are digesting gains around former areas of resistance, and others have failed to sustain their breakouts.
Regardless of where they came from, most commodities are stuck in a range right now. That’s critical information supporting our messy outlook for risk assets.
Despite the recent bout of selling pressure, the primary uptrend is intact. Even the weakest commodities (like thermal coal) are finding support. Lumber is bouncing back above its former 2018 highs and has actually been a leader over short and intermediate time frames.
As for the major procyclical contracts, crude oil just dug in at support and has rebounded nicely this week. Meanwhile, copper continues to chop sideways within the context of a primary uptrend.
Rather than looking for areas to sell, we want to identify pockets of strength for long opportunities. [Read more…]