It's the weekly commodity edition of What the FICC?

Every day we have the choice to either follow the news or follow trends. I choose the latter...

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Inflation has peaked!

Or so I’ve been told… 

Rates are rolling over, undercutting their June highs from last year. High-yield debt, including emerging-market bonds, is catching a bid.

And major commodity indexes are on the verge of breaking down.

That all sounds logical to me.

But just because inflation might begin to ease doesn’t mean I’m taking a bearish stance on inflationary assets, especially commodities.

As crazy as that may seem,  these next four charts support my case…

Check out the long-term chart of gold futures overlaid with copper:

These metals are in the process of carving out decade-long bases.

It's the weekly commodity edition of What the FICC?

As a responsible investor, I refuse to ignore strength. That includes stocks making fresh highs, especially when they're bellwethers!

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As a responsible investor, I refuse to ignore strength. That includes stocks making fresh highs. 

Despite what you may have heard from the major cable networks, many stocks aren’t going down. In fact, many fit our definition of "strength."

Out of all the fresh highs coming in, these three bellwethers take the cake…

Freeport-McMoRan

We look at Freeport-McMoRan $FCX as a proxy for Dr. Copper. Both are economic barometers, and both are posting new multi-month highs:

This is a bullish development for global risk assets, including commodities and their related stocks.

As long as FCX trades above 40, our outlook is higher toward 62, with a target of 97 over longer timeframes.  

Newmont Corp.

It's the weekly commodity edition of What the FICC?

The major commodity indexes look ready to roll despite sustained strength from precious metals.

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From the Desk of Ian Culley @IanCulley

The Bloomberg commodity index $BCOM is breaking down, approaching fresh 52-week lows.

Somehow Gold and Copper didn’t get the memo. They must be too busy printing new highs.

But when we review other major commodity indexes (including our own equal-weight index of 33 individual contracts), they look poised to roll over.

Check out the triple pane chart of the Bloomberg, CRB, and our equal-weight commodity indexes:

It’s interesting to note the differences between these indexes. The weighting structures vary, as do their support levels. But the CRB index and our equal-weight commodity index challenge their 2022 lows while the BCOM has undercut its respective lows. 

From the Desk of Ian Culley @IanCulley

So long, 2022. It’s been real.

With only a few trading hours left in the year, I’m ready to turn the page. I’m sure plenty of you can relate.

In the spirit of looking ahead to a bright and beautiful 2023, I want to share seven of my favorite commodity charts for January.

No grand thesis, just seven potential setups that have my attention heading into the new year.

1. Sugar

Sugar futures print a potential failed breakout after coiling within a tight range since the summer of 2021: The lack of upside follow-through accompanied by a bearish momentum divergence warrants caution.

From the Desk of Ian Culley @IanCulley

Have you noticed commodities are breaking out?

No, not crude oil or copper. I’m talking about sugar, live cattle, and soybean meal.

Though these contracts rarely find themselves on the front page, their upside resolutions provide an important commodity-trading roadmap heading into 2023. 

Plus, their relative strength reveals insight into the underlying nature of the current market environment.

Check out commodity subgroup performances anchored from Sept. 26, when  the US Dollar Index $DXY peaked:

It's the weekly commodity edition of What the FICC?

Today, we focus on metals and the differences between correcting though price versus time.

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From the Desk of Ian Culley @IanCulley

We all learn how to fall – the sooner, the better.

As adults, we forget this is one of the first skills we learn early in life. For better or worse, my one-year-old reminds me daily.

He’s amazing. 

Yes, I’m one of those proud, doting fathers. But his coordination and acrobatics keep both of us out of the pediatric ER (and me, the doghouse). He pops right up whenever he hits the ground and keeps chasing his older brother.

Pure gold.

Since my mind is always lost in the charts, his agility and doggedness remind me of gold’s resilience during the past two years.

You often hear us refer to markets correcting through price or time. It’s an important concept that can reveal underlying strength. 

The dual-pane chart of copper and gold futures presents both:

It's the weekly commodity edition of What the FICC?

Not only are commodities losing their leaders, but the leaders are losing their former 2018 highs. As bearish as this sounds, commodities still deserve the benefit of the doubt.

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From the Desk of Ian Culley @IanCulley

Not only are commodities losing their leaders, but the leaders are losing their former 2018 highs.

Heating oil futures just posted their lowest level since February. Meanwhile, gasoline and crude have printed fresh year-to-date lows, taking out their prior cycle highs.

Now what? 

Should we expect broad selling pressure to hit the commodity space?

Not so fast…

If you believe impending weakness awaits commodities in the coming weeks and months, this chart is for you: our energy index overlaid with our broad commodity index (both equal-weight):