Perhaps they’re giving back some recent gains today, but most stocks are.
More importantly, Monday marked the largest one-day rate-of-change for our Coal Index since 2020…
If you’re wondering why we created an index of coal stocks, the answer is simple: The December 2020 delisting of the VanEck Vectors Coal ETF $KOL forced our hand.
They shut down the only coal ETF just as commodities began ripping (many toward new all-time highs). You can’t make this stuff up…
One of our favorite names – Alpha Metallurgical Resources $AMR – has gained over 4,000% off the December 2020 lows. Unbelievable!
Almost four years later, the rally isn’t over for these names.
Our coal index is on the verge of kicking off the next leg higher:
I’m avoiding the US dollar and interest rate chopfest.
That includes interest rate-sensitive commodities like crude, copper, and gold.
So, let’s check in with a commodity group that walks to the beat of its own drum…
The New York City Softs: Cocoa, Coffee, Cotton, and Sugar.
First up, Cocoa.
I’m sure you’ve seen Cocoa’s 45-year base breakout to new all-time highs:
Cocoa futures have been the main attraction, showcasing a face-ripping rally reminiscent of the 1970s.
In the 70s, Cocoa experienced two 400-plus rallies, each spanning approximately two years trough-to-peak (December ‘71 to April ‘74 and June ‘75 to August ‘77).
Cocoa might have another explosive rally in the tank!
For now, it’s bouncing between two critical extension levels:
While many precious and base metal stocks consolidate, let’s review the next group of mining names before they rip…
Check out the Junior Uranium Miners ETF $URNJ versus the Uranium Miners ETF $URNM:
Despite the significant overlap between these two ETFs, I view a breakout in the URNJ-to-URNM ratio as a clear risk-on signal (much like the relative strength displayed by junior gold miners).
Don’t let a few days of selling pressure fool you.
Despite intense gold, copper, and crude oil pullbacks, many commodity-related assets are flashing buy signals.
For instance…
The Global Carbon ETF $KRBN:
KRBN holds a basket of European and U.S. carbon allowance futures – also known as carbon credits. Companies use these credits to offset the costs of releasing greenhouse gases.
Interestingly, the similarities between the carbon allowances, copper versus gold, and silver versus gold charts are uncanny. All three are violating multi-year downtrend lines, suggesting bullish trend reversals and a risk-on market environment.
We like KRBN long above 35, targeting 56.
That’s it for today. We’ll be back with more next week.
Now, silver is posting fresh decade highs, uranium names are triggering buy signals, and Dr. Copper is slicing through overhead supply.
Plus, increasing copper demand has caught the smart money offside.
Check out copper futures with the Commitment of Traders profile in the lower pane:
Fading commercial (smart money) positioning tends to produce pain.
But even the strongest hands can find themselves on the wrong side of a trade. It happened to commercial hedgers back in 2020, and it’s happening again today.
It might sound silly as the widow-maker is falling back toward its mid-1990s lows.
But this is a logical level to witness a sustained rally. Especially when you consider previous cycles and where Natural Gas is trading relative to crude…
Earlier this week, JC mentioned the crude oil vs. natural gas ratio during an internal strategy session.
He tracked this relationship when he day-traded natty gas, using it as a mean reversion indicator.
Fast-forward to today, and the crude-to-natural-gas ratio is retreating from its highest level in more than a decade.
The last time the ratio hit these levels, natural gas futures ripped 225% in less than two years.
Copper is ripping to its highest level in almost two years, posting a 15% year-to-date gain:
For perspective, the S&P 500 is up less than 5% since January 1.
Our next profit target of roughly 4.85 is now in focus. A decisive break above this new objective sends copper toward new all-time highs and the psychologically important five-dollar level.