From the Desk of Ian Culley @IanCulley

Investors love a good gold debate.

"Is it a commodity, or is it a currency?"

I’d argue it's both.

But, today, I want to focus on gold as a currency in light of a series of new all-time highs versus fiat overseas.

From the Desk of Ian Culley @IanCulley

Everywhere you look, commodities argue a strong case for the next supercycle.  

Live cattle, feeder cattle, sugar, cocoa, and orange juice are all amid historic rallies. Even gold’s resilience in an environment where it should struggle speaks to an underlying demand for raw materials.     

Well, perhaps not everywhere…

While orange juice busts loose on a parabolic advance and cocoa rips toward all-time highs, copper futures barely exceed their year-to-date lows.

On the bright side, it stopped falling.

Check out copper digging in at key pivot lows from earlier this spring:

From the Desk of Ian Culley @IanCulley

It’s beginning to feel an awful lot like 2022.

Rates and the dollar are on pause, bonds can’t stop falling, and the major equity indexes are violating critical support levels.

But the 2s10s spread raised serious questions this week as it hit fresh 52-week highs. 

So, is the market environment changing?

Let’s find out…

Check out the 2s10s spread challenging zero from below:

An inverted yield curve (widely measured by the 2s10s and 3mo.-10yr. spreads) has cast a pall over capital markets, promising an economic recession for over a year. Yet the US economy remains strong.

From the Desk of Ian Culley @IanCulley

Economists, columnists, and pundits are calling for an economic recession and even the possibility of deflation. 

Yet the US dollar is consolidating above a critical support zone.

Nothing bearish about that!

In fact, it’s standard price behavior within an ongoing uptrend. 

Sure, the pundits might be right. But both scenarios involve a swift decline in the US dollar.

And that’s simply not what’s happening today.   

In fact, forex markets are providing new opportunities to buy US dollars and sell other major currencies…

Check out the EUR/USD pair pulling back to a logical resistance level:

From the Desk of Ian Culley @IanCulley

Gold and silver are pushing higher after posting potential failed breakdowns earlier this month.

If the October lows mark a critical inflection point – and it’s still a big “if” – the following three names will be ripping above our risk levels…

From the Desk of Ian Culley @IanCulley

Investors navigate a market of stocks, not a “stock market.”

Equity indexes slide, and US treasuries collapse against a rapid rise in interest rates. Unfortunately for the bulls, the charts show no signs of an imminent change in these underlying trends. 

That’s the environment, and there’s no use fighting it.

Have no fear: We can still lean into market areas that enjoy a rising rate environment, mainly energy.

Here’s the US 30-year yield breaking to its highest level since the summer of ‘07:

Rising rates are the market’s golden thread.

Owning the stock market averages will prove difficult as long as yields press higher.

From the Desk of Ian Culley @IanCulley

Survey says… 

Buy commodities!

The multi-year secular uptrend in commodities remains intact on absolute and relative terms. Commodities are outperforming the S&P 500 and US Treasury bonds. And cattle, sugar, cocoa, and orange juice are all ripping.

While some of these explosive rallies pause, other areas of the commodity space are forming tactical reversal patterns.

Let’s check out one of my favorites,…

Corn.

Here’s the December corn contract carving out a ten-week base:

I bought yesterday’s close above 500’0. That’s our risk level. As long as corn trades above that level, I like it long toward the July high at approximately 570’0.

However, during today's session, I was abruptly stopped out of my position.

Gold has leaned sideways to lower lately.

The US dollar and interest rates continue to rise, creating unfavorable conditions for the yellow metal and its crazy cousin, silver.

As long as those trends remain intact, precious metals will struggle. And they have... until very recently.

Regardless of the broader intermarket landscape, I can't ignore near-term strength for these shiny rocks...

From the Desk of Ian Culley @IanCulley

The US Dollar Index $DXY is chopping smack-dab in the middle of a three-week range.

Currency markets are quiet. The euro, the pound, and the yen have all dialed back the volatility.

But there’s nothing wrong with the sideways action.

And in no way does it diminish the underlying uptrend for the dollar. 

In fact, the near-term trendless range makes sense in light of DXY’s recent run and the long-term support levels in play for major currencies.

Check out the DXY with the number of consecutive up weeks in the lower pane: 

Eleven weeks in a row! The index climbed higher for almost three straight months. 

A period of consolidation not only makes sense but politely adheres to the law of gravity.

From the Desk of Ian Culley @IanCulley

Buyers drove home their precious metals stance for a second week.

Gold and silver posted wide-bodied bars, rocketing higher on the open and closing near the day’s peaks. 

Bullish momentum thrusts like these tend to spark sustained rallies.

That's right!

It could be off to the races for these shiny rocks, especially given the crucial levels recovered last Friday...

From the Desk of Ian Culley @IanCulley

Price must hold above key support levels when defining a range or uptrend.

It might sound simple. Yet investors often sideline these crucial levels in favor of the latest headline.

I read the news daily and support journalists fighting the good fight. However, I don’t incorporate what I read in the papers into my market analysis. 

Instead, I focus on price and the critical areas seared into the collective memory bank – support and resistance.

Perhaps you can guess my response when a reader recently asked, “What will it take for crude oil to break down?”

Price must undercut support!

Check out the daily crude oil chart:

From the Desk of Ian Culley @IanCulley

Price doesn’t move in a straight line.

Just don’t tell the US dollar, which has managed to post positive gains for 11 straight weeks. 

But the US Dollar Index $DXY is sporting its deepest drawdown since mid-July – a mere 0.2% – as buyers catch their breath.

Five down days and counting have my attention, though it doesn’t shift my bullish bias for King Dollar.

Not yet!

Check out last week’s DXY candle:

Buyers drove prices higher over the course of last week only to succumb to selling pressure by Friday’s close.