From the Desk of Ian Culley @IanCulley

Commodities are on the rocks.

Our Equal-Weight 33 Commodity Index is printing fresh two-year lows. Crude oil is hanging around the lower bounds of a multi-month consolidation. And Dr. Copper is loitering below former support.

This isn’t bull market behavior.

But just as the stock market is a market of stocks, the commodity market is a market of, well, a diverse set of commodities.  

So, while I don’t want to buy many high-profile procyclical contracts – and certainly not the commodity indexes – I do like the more obscure areas showing strength…

Areas such as uranium!

I outlined my case for uranium stocks at the start of the year. It was pretty simple: If gold and copper are printing fresh highs, peripheral areas likely enjoy a bid. That includes uranium.

From the Desk of Ian Culley @IanCulley

Former resistance turns into potential support – and vice versa.

That’s Polarity 101. It’s a pattern found throughout the market. It doesn’t matter the asset class – Bitcoin or Berkshire. It’s simply human psychology at work. 

These levels often mark missed opportunities. And, in the process, they create price memory that fuels increased activity. Traders and investors are driven to transact at these levels, highlighting supply and demand zones that act as support or resistance.

Why does this matter right now?

Because gold futures have sliced through near-term support, careening toward a level etched in the minds of goldbugs everywhere…

I’m talking about the 2011 highs!

Gold futures recently undercut a key level marked by the February pivot highs and last month’s pivot lows – a polarity zone.

From the Desk of Ian Culley @IanCulley

Watch out for cotton!

Back in February, I highlighted a bullish setup in cotton futures. 

Buyers were hammering a key retracement level from below. The way I learned it, "The more times a level is tested, the higher the likelihood it breaks."

Three months later…

The July contract is knocking on the door – again!

How polite.

Check out July cotton nearing the January 2022 closing high of 88.34:

That’s my level.

From the Desk of Ian Culley @IanCulley

Dr. Copper is limping into the close – on pace for its worst week since last November.

The risk-off tone that began earlier in the week is intensifying. Crude oil is turning lower. Gold is pulling back. And the equity indexes are drowning in a sea of red.

But nothing stings stock market bulls quite as badly as the breakdown in copper futures…

Copper just undercut a key polarity zone marked by the August 2022 pivot highs.

From the Desk of Ian Culley @IanCulley

It’s getting busy in the commodities space.

Live cattle posted a new all-time high last month. Precious metals are gearing up for a potential rip-roaring rally, as gold retested all-time highs yesterday. And sugar futures refuse to quit.

But when I review my commodity charts, I notice more topping formations underway than bottoming patterns.

Crude oil is front and center as the energy space – commodities and stocks – remains one of the weakest areas of the market. 

That’s why yesterday’s action in crude has my full attention…

Check out Thursday’s candle in crude oil futures:

From the Desk of Ian Culley @IanCulley

The increased selling pressure across grain markets might not be on your radar. 

But pay close attention: The soybean complex, corn, and wheat are edging toward their respective year-to-date lows as demand wanes. 

Even if you don’t trade these ag contracts, fresh multi-month lows – especially in wheat – carry broad implications for equities and cyclical assets. (Hint: It has to do with crude oil.) 

That’s why I’m on high alert for a potential breakdown in Chicago wheat…

Wheat has been in a strong downtrend since its March 2022 peak, entering a bearish momentum regime last summer.

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:

From the Desk of Ian Culley @IanCulley

Precious metals and crude oil stole the show this week.

Crude oil reclaimed its prior-cycle peak, gapping higher on the Sunday open, while gold and silver posted fresh highs. 

I’ll have more on those shiny metals Monday in the weekly Gold Rush report.

Today, I want to bring your attention to a commodity that often escapes the headlines – palladium – and why I think a significant bottom could be in place for this diverse metal.

I say “diverse” because palladium has multiple use-cases, from catalytic converters to fine jewelry.

Around ASC we jokingly refer to palladium as “the Notre Dame of precious metals” because it’s in its own conference. 

Categorizations aside, here are three reasons I believe palladium is a strong buy…

• Commercial Positioning

Commercial hedges hold their largest net-long position in history!

From the Desk of Ian Culley @IanCulley

Buying opportunities abound across commodities.

It’s easy to miss this phenomenon if you’re solely focused on the major indexes, as the CRB Index and the Bloomberg Commodity Index $BCOM broke down earlier this month. 

Don’t let those charts mislead you. Plenty of sweet setups present themselves.

And the next chart is by far my favorite…

Cocoa!

Check out the five-year base in cocoa futures:

Cocoa is taking the shape of a potential ascending triangle. This pattern carries a bullish bias as buyers step in, creating a series of higher lows. 

From the Desk of Ian Culley @IanCulley

I can’t think of a better time to review the major commodity indexes. 

The rising rate environment is reversing, and it’s taking commodities with it.

Let’s dive in and see what’s going on in the space! We also need to check in with a key intermarket ratio, revealing where we want to position ourselves in the coming months and quarters.

Check out the triple-pane chart of the Bloomberg Commodity Index $BCOM, the CRB Index, and our equal-weight index comprised of 33 individual contracts (EW33):

From the Desk of Steve Strazza @Sstrazza

Due to the recent bank failures, this week has been all about the financial sector and the selling pressure taking place there.

However, the price action for energy stocks has been even worse by some measures.

The Energy Sector SPDR $XLE is on pace to fall -6.8% this week, while the Financials Sector SPDR is only lower by about -5.8%.

When we look at energy futures, the outlook only worsens with crude oil registering its largest weekly loss since trading into negative territory in April 2020.

So, what does this all mean for the bull market in energy?

The sector has been so resilient, showing steady leadership for several years now. Is it all over?

Maybe not, but there is some serious damage that will require immediate repair work.

Let's take a look at it.

Check out the equal-weight energy index:

It’s finding support where I would expect – the prior-cycle highs from 2018 and a key retracement level off the 2020 low.