From the Desk of Ian Culley @IanCulley

Investors are becoming restless.

Silver is dancing around a significant breakout level. And gold continues its sideways chop for the third straight month.

It’s certainly been a challenging time to hold precious metals trades – even for the most patient investors.

To kick off the third quarter, let’s utilize fresh monthly data to step back and review the primary trends for gold, silver, platinum, and palladium.

From the Desk of Ian Culley @IanCulley

Our cotton and sugar trades are working. Coffee is raring to go.

And crude oil is pushing toward a solid first-half finish.

Beyond that, commodities are dribbling lower.

Let’s review an energy contract that broke out two months ago and has never looked back—Natty Gas!

Natural gas futures are carving out an eighteen-month base below last year’s high:

I outlined our bullish outlook in late April. Natty Gas ripped the following week, rallying more than a dollar in just six weeks.

Now, price is consolidating within a twenty-percent range (potential right shoulder):

From the Desk of Ian Culley @IanCulley

Precious metals bulls are taking a stand.

It’s easy to overlook following Friday’s selling pressure.

But price is respecting critical support levels for gold, platinum, palladium, and even gold’s crazy cousin.

From the Desk of Ian Culley @IanCulley

Mark it, dude.

We have another bearish divergence calling strike three on the stock market rally…

High-yield bonds $HYG versus US Treasuries $IEI.

Check out the HYG/IEI ratio (dark blue line) overlaid with the S&P 500 ETF $SPY:

We use the HY bond-to-US Treasury ratio to track credit spreads. When the dark blue line falls, credit spreads widen – a sign of dwindling liquidity and stress for the bond market (the world’s largest market).

Stocks tend to struggle as credit spreads widen. 

On the flip side, when these spreads contract (or the HYG/IEI ratio catches higher) stocks rally as capital flows into risk assets. That’s why these two lines trend together. 

Notice the HYG/IEI ratio and SPY bottomed last October before rallying into the spring, following a similar path to new highs. 

From the Desk of Ian Culley @IanCulley

Cattle futures are defying gravity.

Unlike most commodities during this cycle (pick your favorite base metal or grain contract), cattle have yet to correct lower. 

Instead, they’re still hanging around new all-time highs.

Something has to give...

Check out the diamond top taking shape on the live cattle chart:

Diamond tops are a rare bearish reversal pattern. They’re so rare that I’m slow to draw their boundaries. 

But I was reassured when referencing Richard W. Schabacker’s Technical Analysis and Stock Market Profits: “The real bible of technical analysis.”

He points out,

From the Desk of Ian Culley @IanCulley

So much for buying the Japanese yen.

Forex markets are taking a shot at the Japanese currency as the aussie, kiwi, and Canadian dollars post fresh decade highs versus the yen.

Not to be outdone, the USD/JPY pair is printing its highest daily close since April 1990!

Check out the dollar-yen’s eight-week base breakout:

The path of least resistance now points higher toward 170, but only if the USD/JPY trades above 158.

From the Desk of Ian Culley @IanCulley

Gold bugs have seen brighter days.

Silver is underperforming Gold. The corrections in Platinum and Palladium are burrowing deeper beneath our breakout levels. And the Gold Miners ETF $GDX is printing fresh lows versus the broader market. 

It doesn’t sound bullish to me.

Yet gold futures are solid as a rock!

From the Desk of Ian Culley @IanCulley

I’m avoiding the US dollar and interest rate chopfest.

That includes interest rate-sensitive commodities like crude, copper, and gold.

So, let’s check in with a commodity group that walks to the beat of its own drum…

The New York City Softs: Cocoa, Coffee, Cotton, and Sugar.

First up, Cocoa. 

I’m sure you’ve seen Cocoa’s 45-year base breakout to new all-time highs:

Cocoa futures have been the main attraction, showcasing a face-ripping rally reminiscent of the 1970s.

In the 70s, Cocoa experienced two 400-plus rallies, each spanning approximately two years trough-to-peak (December ‘71 to April ‘74 and June ‘75 to August ‘77).

Cocoa might have another explosive rally in the tank!

For now, it’s bouncing between two critical extension levels:

From the Desk of Ian Culley @IanCulley

The Nasdaq is ripping to new all-time highs. NVIDIA’s market cap is surpassing the three-trillion-dollar mark. And US T-bonds are registering another buy signal. 

But the market’s still a mess. 

Just look at yesterday’s intraday reversal—a bullish reaction to inflation data in the morning, followed by a bearish reaction to the FOMC meeting in the afternoon. Investors are still trying to make sense of the mid-week hoopla.

Friday’s close (the most important data point of the week) will reveal critical information regarding market conviction heading into the weekend.

Meanwhile, you can track high-yield bonds for risk-on confirmation.

Check out the HY Bond ETF $HYG overlaid with the high beta-versus-low volatility ratio (using the $SPHB and $SPLV ETFs):

From the Desk of Ian Culley @IanCulley

Check out these currency headlines:

The Buck Strikes Back… 

Investors Sideline a Defiant Dollar… 

Dollar Down? The 10-Year Says “Yes!”... 

The USD Rally Proves Sticky… 

Weighing a Potential Dollar Breakdown…

Well, which is it? Is the dollar going up… or down?

I have no idea. 

But given the market's current shape, your best forex bets are to short the euro and buy the yen…

If that sounds familiar, I shared a similar perspective during last month’s Fed Day.

From the Desk of Ian Culley @IanCulley

Metals bulls are waking up following last week’s selling pressure.

Copper, silver, platinum: It didn’t matter. Base and precious metals took a hit.

It was ugly but not a complete disaster.

Call me a gold bug if you like (I won’t take offense), but don’t overlook the key takeaway from last week’s session: gold’s resilience.

From the Desk of Ian Culley @IanCulley

Copper Springs into Action… Buyers Dig Copper… Copper, F%$# Yeah!

Those are a few titles I spitballed last night. But the markets wouldn’t have it.

This morning, the overall theme of the metals space turned on its head, trashing my bullish bias.

To be clear, I still have a favorable outlook for base and precious metals over longer time frames…

Yet we’re all forced to navigate the near-term selling pressure. 

Earlier this week, Dr. Copper found support right where we would expect – a key retracement level: