From the Desk of Ian Culley @IanCulley

The commodity supercycle will not be televised.

Jim Cramer will not provide commentary on cotton, cattle, and/or the crack spread.

Hollywood will not make a movie on crude oil trading below zero.

Nor will jeera futures have their turn in the limelight.  

That doesn’t mean we should plug in, turn on and cop out.

Instead, let’s focus on the charts…

Here’s the S&P 500 versus the CRB Index, a simple stocks/commodities ratio:

It’s been commodities over stocks since crude traded below zero in the spring of 2020.

Yes, the correction favoring stocks off the 2022 lows has been significant.

But it’s retreating from a logical confluence of potential resistance – a multi-year downtrend line and a key retracement level. 

From the Desk of Ian Culley @IanCulley

Investors are bidding up growth names.

Perhaps it comes as a surprise, given elevated interest rates.

It did catch me off guard, but it hasn’t stopped me from taking advantage of the developing trend.

I’m not the only one noting the peculiar divergence between rates and tech stocks.

Todd Gordon cited a persistent rise in rates as a potential headwind for the growth trade during Friday’s episode of The Morning Show.

(If you haven’t watched his segment, check it out here.)

One of the charts he shared on the subject has also been on my radar…

Here’s the overlay chart of the US 10-year yield and the Small-Cap Value ETF (IWO) relative to the  Small-Cap Growth ETF (IWN):

From the Desk of Ian Culley @IanCulley

I left gold bugs an urgent message last week.

“This mess could turn downright ugly for the entire precious metals space if buyers don’t step in and support higher prices in palladium – and fast.”

I am many things, but “alarmist” isn't one of them. I simply find it hard to believe gold will post new all-time highs while palladium falls to fresh five-year lows.

Call me crazy, but those two puzzle pieces don’t seem to fit.

Perhaps we’ll never know for sure, as buyers showed up right on cue, driving palladium higher ahead of the three-day weekend. 

Last week’s strength bodes well for all metals, industrial and precious. So I’ll reiterate critical levels to trade against in palladium.

But I also want to share a strong correlation between this multifaceted metal and a market I would never have guessed…

A healthy rotation is underway across equity markets.

Leadership has swung toward cyclical value-oriented names over the trailing two weeks. Small-cap Energy, Materials, and Financials are outpacing the year-to-date top performers (Large-cap Tech). It’s a clear expansion in participation and a hallmark characteristic of any bull market.

But if cyclical stocks have a chance at participating over the long haul, we want to witness similar strength from corresponding commodity markets.

And we are…

Check out rebar futures posting a potential failed breakdown: 

From the Desk of Ian Culley @IanCulley

Forget about Wednesday’s FOMC decision.

Yes, investors continue to react, unpacking Jerome Powell’s words while looking ahead to next month’s meeting. It’s a never-ending cycle proffered by unrelenting data.

But it’s this constant flux that makes the market the most engaging puzzle in the world (aside from life, of course).

Yet one piece of the puzzle renders the chaos manageable… 

The closing price.

That’s the main reason I choose to devote the majority of my energy to price charts. The closing price is seldom revised, acting as an anchor during turbulent conditions. 

Call me old school, but price is never wrong.

With that in mind, let’s take a fresh look at a key intermarket ratio many (including me) have labeled “broken”...

I'm talking about regional banks versus REITs.

From the Desk of Ian Culley @IanCulley

Markets are bracing for tomorrow’s FOMC decision – including the dollar.

That’s right – we have more indecisive action on tap. Let’s call it the knee-jerk before the knee-jerk, with a little help from today’s May CPI print. 

Interest rates, the US Dollar Index $DXY, and gold have yet to make a decisive directional move.

To be fair, most markets are trading within their respective year-to-date ranges (except the S&P 500 and Nasdaq 100, of course).

But if we turn to emerging market currencies, we don’t see any sign of hesitation…

Check out our EM Commodity Currency Index (equally weighting the Mexican peso, the Brazilian real, the Chilean peso, and the South African rand) posting new 52-week highs after violating a long-term downtrend line at the beginning of the year:

From the Desk of Ian Culley @IanCulley

Gold can’t do all the heavy lifting.

I believe a generational rally for gold has already begun. But my structural outlook hinges on the former 2011 peak.

Gold must hold above that former high, marking the end of the previous secular bull run. 

It’s held this level so far. 

But if gold has any chance of printing new all-time highs as it has versus most major global currencies, it needs a little help from its friends…

From the Desk of Ian Culley @IanCulley

International credit spreads are contracting.

Investors are running from imminent global collapse by reaching for emerging market bonds over risk-free US Treasuries. 

Wait, perhaps I heard it wrong. 

It could have been a US economic collapse. 

Or was it the Chinese yuan replacing the US dollar as the world’s reserve currency?

Honestly, I don't pay much attention to the doom and gloom. (But I do find it amusing.)  

I’m not the only one ignoring the bad vibes.

The markets are also disregarding the fear mongers…

Check out the Emerging Bond ETF (EMB) versus the US Treasuries ETF (IEF) ratio overlaid with the S&P 500 ETF (SPY):

These two lines follow a similar path – a path currently driven by burgeoning risk appetite.

From the Desk of Ian Culley @IanCulley

Petrocurrencies and crude oil futures are diverging.

The currencies that benefit most from higher oil prices refuse to roll with crude’s steady decline. 

Perhaps it’s more about the US dollar than a handful of currencies tied to oil’s supply and demand dynamic.

But with OPEC up to its old tricks again – Saudi Arabia announced deeper production cuts last weekend – the question arises…

Is crude oil due for a bounce?

Check out the overlay chart of our petrocurrency index and crude oil futures:

Crude oil posted a key pivot high a week after our index bottomed in late September. Since then, these markets have taken separate paths.

From the Desk of Ian Culley @IanCulley

What will it take for gold to make new all-time highs?

A weaker US dollar and falling real yields are likely candidates for leading catalysts.

We can also add a significant unwind in commercial positioning to the list. 

Meanwhile, it’s a range-bound mess.

Let's stick to the basics. Uptrends – at the core – come down to more buyers than sellers. And risk-on/risk-off intermarket ratios provide excellent tools for tracking whether bulls or bears dominate a particular market.

After the recent bout of selling pressure, one precious metal risk ratio is approaching a potential inflection point…

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

US interest rates have churned within a tight range for months. 

Remember: Sideways is a trend. 

While intermarket evidence suggests a breakdown in yields, they simply refuse to roll over.

It makes perfect sense when we zoom out…

Rates are in a well-defined structural uptrend!

Check out the US 30-year Treasury yield overlaid with live cattle futures:

They look almost identical as both exhibit the classic base-on-base formation – one upside resolution followed by another.