From the Desk of Ian Culley @IanCulley

It’s good to be a gold bug.

New all-time highs and fresh breakouts are dotting the charts. Buy signals are flashing left and right. And even the laggards – Palladium and Platinum – are refusing to break down. 

Best of all, Gold has a one-track mind: up and to the right!

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is finishing the day relatively unchanged.

Today’s much anticipated CPI print failed to move the needle for the greenback.

On the flip side, $DXY’s most significant component – the euro – is ripping toward a new year-to-date high.

Check out the EUR/USD pair completing a seven-month bullish reversal pattern, retesting its January high:

The path of least resistance now leads higher.

I like buying the euro against the 1.0958 breakout level, targeting 1.1250. But I'm out if the EUR/USD slips into its prior range.

A pop in the euro tends to weaken DXY since it makes up 56.7% of the index, acting as a bullish catalyst for stocks. 

Yet the dollar continues to hold above last Monday’s low.

From the Desk of Ian Culley @IanCulley

Don’t believe the headlines.

It’s not all doom and gloom for the market.

Plenty of assets are trending higher, mainly those related to precious metals.

Gold is challenging all-time highs. Silver is catching a bid. Palladium is digging in at former support. (So much for those seven-year lows.)

And gold and silver mining stocks are ripping…

From the Desk of Ian Culley @IanCulley

Here’s what happened last week...

A few bad actors used open profits from highly leveraged positions to purchase other assets.

When those highly leveraged positions turned against them – ripping their faces off – margin calls went unanswered, leading to a lack of liquidity.

Bonds ripped, stocks dipped, and credit spreads blew out. 

Now that the dust is settling, let’s review a few takeaways from last week’s volatility and consider what may lie ahead.

Credit Spreads Had it Right

Bonds hinted at a stock market correction months ago as widening credit spreads failed to confirm new all-time highs.  

The increasing stress on credit markets culminated in the High-Yield $HYG versus US Treasuries $IEI ratio blowing out to its lowest 14-day RSI reading since September 2008:

From the Desk of Ian Culley @IanCulley

Stocks aren’t the only risk assets falling this week.

Rebar, Corn, and Cotton are posting multi-year lows. Dr.Copper is slipping below four bucks. And our short cattle trades are working.  

But as most commodities slide, one area (aside from precious metals) is finding its feet.

Notice the CRB Index is carving out a two-year base while our equal-weight index hits its lowest level since early 2021:

The disparity between the two indexes comes down to their construction. 

We weigh 33 commodities equally for our index, so rebar futures carry the same weight as crude oil. 

On the other hand, crude comprises almost a quarter of the CRB Index.

These stark contrasts reveal two pertinent themes: broadening weakness among commodities and emerging relative strength from energy.

From the Desk of Ian Culley @IanCulley

Let everyone grumble over the Japanese yen.

I get it. The yen was cast as the villain decades ago, and something or someone must take the blame for the VIX hitting 65 earlier this week.

While I prefer to point my finger at the preceding low-volatility environment, the November election, and potential rate cuts, the yen certainly played a part. 

But the real question isn’t who, what, when, where, or why. 

Instead, every investor wants to know…Was that it? 

Is the selloff over?

I think the worst is behind us. 

Here’s why…

Check out the USD/JPY chart with a 200-day simple moving average in bright blue (with the percentage above or below the long-term average in the lower pane):

In many ways the yen carry trade is a play on interest rates.

From the Desk of Ian Culley @IanCulley

Give the bears a pass. 

Precious metals and the companies that mine the rocks are seeing red. The new lows list is expanding. And breakouts are failing. 

I don’t want to step in front of that broadening weakness.

Instead, it’s time to protect profits and cut losers. Especially those losers printing multi-year lows…

From the Desk of Ian Culley @IanCulley

Aside from gold’s new all-time highs, commodities look rough.

Natty gas is falling below two bucks. Copper is retesting four. And corn is rolling to its lowest level since 2020.

But of all the vulnerable commodities contracts, only one area stands out as a viable short: cattle.

Feeder cattle futures closed below 250 this afternoon, triggering a sell signal:

Notice the 14-day RSI led price by registering a new multi-month low ahead of today’s breakdown. The waning momentum speaks to weakening demand and the possibility of a swift move lower.  

From the Desk of Ian Culley @IanCulley

US Treasuries are sticking a bullish reversal – an admirable feat following an unforgettable selloff.

If you aren’t buying bonds yet, it’s time to reconsider.

Here's the US T-Bond ETF $TLT trading above a rising 200-day moving average as it violates a multi-year downtrend line:

These are the early signs of a trend reversal.

Now, bond bulls want to witness the 14-week RSI post fresh multi-year highs. (We may see such a print following today’s action.)

Heading into the close, the 30-year T-bond is registering its largest one-week rate of change since spring 2020. And on a more tactical time frame, the 14-day RSI is reaching overbought conditions. 

From the Desk of Ian Culley @IanCulley

Remember when anything priced in yen was trending higher?

It wasn’t too long ago that if you were looking for an uptrend, all you had to do was throw the yen in the denominator, and voila.

Just last month, the dollar hit a new 34-year high against the yen—levels not seen since the 1980s.

But the tables are turning in favor of the Japanese currency.  

While most central banks are either cutting interest rates or considering future rate cuts, the Bank of Japan (BOJ) is hiking—a policy shift that puts a bid beneath the yen…

A couple of months ago, I highlighted buying yen futures above .6500.

Fast forward to today, and I’ve adjusted the entry-level to the former 2022 and 2023 lows at approximately .6625:

From the Desk of Ian Culley @IanCulley

Perhaps gold and silver are stuck beneath overhead supply. 

But that’s not stopping mining stocks from hitting new highs…

From the Desks of Ian Culley @IanCulley and Sam Gatlin @Sam_Gatlin

It’s time to buy natty gas.

A bullish momentum swing is on the verge of flashing green. And seasonal tailwinds are due to pick up as price pulls back. 

Plus, the dominant four-year cycle is approaching the next expansion phase.

Buckle up!

Check out the monthly natty gas chart with a MAC-D momentum indicator in the lower pane:

The monthly MAC-D is nearing a bullish crossover at extreme oversold conditions. This long-term momentum setup occurs after cyclical lows, marking critical inflection points in 2012, 2016, and 2020.  

Also, all three previous natty gas cycles hit bottom in the spring and ripped higher toward the end of summer – the start of the best three months of the year (August- October).