From the Desk of Ian Culley @IanCulley

In late September, we highlighted the prior-cycle highs for the top commodity contracts.

The question was whether these levels would hold as support. So far, they have. But it’s two months later, and we’re asking the same question as those 2018 highs come into play again.

Let’s check back in on these critical levels of resistance turned support for clarity heading into year-end.

For crude oil futures, 76 is still our line in the sand:

It coincides with its 2018 highs, its July pivot highs from last year, and this year’s September pivot lows. Former resistance has turned into support.

Now, will this newfound support hold?

Based on Monday’s action, yes!

Crude began this week slicing through our level of interest, only to reverse significantly higher by the close. Monday’s bounce off support was...

From the Desk of Ian Culley @IanCulley

I’ve tried the paleo diet. 

I’ve even gone primal, cutting carbs while increasing fats for long periods of time. 

But I haven’t tried the new all-meat-all-the-time lifestyle. 

Whether you’re a full-on carnivore -- or even if you just enjoy a nice steak once in a while -- it’s time to hedge against rising beef costs using the futures markets.

Check out the chart of feeder cattle futures:

Feeder cattle represent weaned calves making their debut at the feed lots. They range from six to 10 months old and tend to weigh between 600 and 800 pounds.

While these young cows still have weight to put on, from the looks of the weekly chart, they’re planning to eat well this holiday season. 

Feeder cattle futures hit our initial target during summer and have since corrected. Despite the recent pullback, the uptrend...

From the Desk of Ian Culley @IanCulley

The bulls are dropping the US dollar like it's hot – and risk assets worldwide love it! 

Few areas are enjoying the newfound dollar weakness quite like the metals space. It’s not just precious or base metals catching higher. It’s both.

So if you shelved those shiny rocks months ago, it’s time to pull them out and take a look.

Copper futures are up first:

Dr. Copper went out with a bang last week, posting its largest single-day return since 2009. We call these types of strong directional moves momentum thrusts. 

They often indicate either the exhaustion of an ongoing trend or the initiation of a new trend. Our money is on the latter when it comes to copper.

Yesterday it took out its summer pivot highs. Those former highs are a great level to define our risk.

I like copper futures long if and only if...

From the Desk of Ian Culley @IanCulley

Metals have been one of the weakest areas of the market this year.

It doesn’t matter if we’re talking about the materials sector, commodity space, base and industrial metals, or gold. These assets have carried nothing but downside risk.

But mix in a little dollar weakness, and we see an impressive display of strength. Metals are finally looking like they have something to prove.

Yes, it’s only one day of action. But it’s a day worth noting…

Check out the breakout in copper futures, posting its largest single-day return since 2009:

This is a big development for commodities and risk assets in general.

Copper has found support at its prior cycle peak and is now resolving higher from a three-month consolidation. One of the most-watched leading economic indicators is signaling all is well.

Based on Dr. Copper's bullish breakout, we would expect metal and mining stocks to join the party. ...

From the Desk of Ian Culley @IanCulley

Energy stocks refuse to lose.

We can’t deny the relative strength of the energy space, whether we’re talking about stocks or commodities. But it’s been equities over the raw materials for months now.

It doesn’t look like that will change any time soon. However, I doubt energy contracts will be left behind.

Let’s run down the most actively traded contracts for crude, gasoline, and heating oil. First, crude oil:

The December contract has chopped around a key level of former support at 85. Despite the sloppy nature of the chart, I don’t hate a long position here. But that's only if it’s above 85.

Keep in mind crude oil has been messy, so you’ll want to give it room to breathe. Plus, potential resistance comes in at the July and August pivot highs around 96. 

I’d much rather trade gasoline or heating oil for two reasons...

From the Desk of Ian Culley @IanCulley

It’s easy to lose sight of how impressive energy has been this year. 

We get it. Sideways action is boring.

But while the rest of the market has been selling off, energy has shown incredible resilience, digesting gains in a continuation pattern since early summer.

After an explosive rally for energy stocks off the 2020 lows, it’s normal to experience an extended period of corrective action. In fact, it’s healthy. 

Now get this...

Many of these stocks haven’t even broken out yet!

We know it sounds crazy, especially when some of these industry groups have more than tripled during the trailing 24 months.

But the charts don’t lie. They’re telling us some of these trends might just be getting started. Let’s take a look.

We can break down oil and gas companies into three main categories: upstream, midstream, and downstream. 

These designations refer to where a particular company operates along the supply chain, from extracting the raw material to selling the refined...

From the Desk of Ian Culley @IanCulley

The commodity markets never lack action. 

Since it’s such a diverse asset class, we’ll always have contracts we want to buy, some that we want to short, and others we want to avoid.

Today, I’m going to outline one of each. Let’s dive in!

The Breakout

According to the latest reports, Hurricane Ian (strong name, terrible storm) may have cut the Florida orange crop in half.

Whether it’s true doesn’t matter. I’m more concerned with a well-defined level to trade against. Check out the daily chart of orange juice futures:

The chart looks good to me! A five-month base breakout to fresh five-year highs is the kind of strength I like to buy.

The line in the sand is 191. You can get long above this level with an initial target of 220 and a secondary objective of 242.50.

Remember, OJ futures are thinly traded. You need to adjust your...

From the Desk of Ian Culley @IanCulley

I love it when a pattern carries both bullish and bearish implications. It could break out or break down. Either direction works for me.

That’s the beauty of the setup. 

For traders, the directional move doesn't matter. We can prepare for both outcomes. And, lucky for us, sugar futures look ready to swing either way.

Check out the weekly continuation chart of sugar:

Sugar posted a big base breakout followed by a year-long consolidation. This chart looks similar to gasoline, crude oil, and copper – which have all broken down to retest their respective 2018 highs.

It’s reasonable to imagine sugar futures do the same. But we have to see the move before we can take action.

Here’s a daily chart of the most actively traded contract (March 2023):

...

From the Desk of Ian Culley @IanCulley

After months of selling pressure, the most widely followed commodity contracts are testing critical potential support levels.

More importantly, these support levels are the prior-cycle highs marked by the 2018 peaks. If there was ever a place where the bulls needed to step in and repair the damage this is it!

But, if these levels fail, we’ll have to rethink the structural uptrend in commodities.

Let’s run through the charts.

First, we have our commodity index that equal-weights the top 33 contracts in our universe:

Earlier this week, the index completed an 18-month top and broke to its lowest level since April 2021. This highlights the broad selling pressure across the commodity space and the need for a...

From the Desk of Ian Culley @IanCulley

It’s not all doom and gloom out there… 

I know the market’s ugly right now. Risk assets are getting crushed across the board. 

But, believe it or not, greener pastures do exist in this market.

And, on days like these, I choose to focus on areas that aren’t free-falling into the fiery depths of hell.

Last week, I discussed the relative strength of the less economically sensitive grain complex. These contracts are more defensive in nature and are currently escaping the broad selling pressure.

That’s a relief!

When it comes to today’s trade ideas, I’m sticking to the individual contracts with the highest volume heading into the fall. Those are the charts and levels of the most importance.

Do the levels on the continuation charts come into consideration?

Absolutely!

Premium members can reference our Commodity Chartbook below for our structural outlook and reach out at info@allstarcharts.com with further questions.

All right! Let...

From the Desk of Ian Culley @IanCulley

The big news in commodities this week is gold breaking down to its lowest level since early 2020.

I recently outlined what a downside resolution for the shiny yellow rock could mean for inflation and the entire commodity space.

Spoiler alert: a fresh leg lower from gold doesn’t bode well for raw materials or the prospects of sustained inflation.

Nevertheless, inflation hasn’t gone anywhere, at least not yet. 

As long as that’s the case, we expect commodities to see further upside, albeit not in unison. The broad rally witnessed at the end of 2020 into 2021 is unlikely to be repeated in the near future.

Regardless, stellar buying opportunities will present themselves.

We aren't going to let the bifurcated nature of commodity markets stop us from catching the next explosive rally.

In other words, the supply and demand dynamics for copper don't affect our decision to trade soybeans or wheat.

Instead, let's trade what is in front of us – even as...

From the Desk of Ian Culley @IanCulley

Gold has been a terrible inflation hedge over the trailing 24 months. It’s gone nowhere since the summer of 2020, while every other commodities have experienced rip-roaring rallies.

The truth is, the "inflation hedge" narrative is just that – a narrative. And I believe it’s false.

But, more importantly, so does price.

I prefer to lean on John Murphy’s observation that gold has a tendency to sniff out inflation, leading to major bull runs in commodities.

And, with gold futures on the verge of breaking down to fresh two-year lows, I think it’s a good time to revisit this often misunderstood metal.

Remember, gold was the first commodity to rally in 2019 – a full year ahead of the rest of the rest of the space.

Here’s a chart of gold futures overlaid with our equal-weight commodity index, highlighting the base breakouts:

Not only did gold experience a swift rally while most commodities were fast...