From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Whether we’re talking about stocks, commodities, currencies, or even the bond market, things have been a total mess. It’s no secret, and you’re probably tired of hearing it by now.

Trust me, we’re just as tired of seeing it.

So, as these choppy conditions test our patience and discipline, why not use this opportunity to take a step back and examine where we’ve come from, where we are now, and where we’re likely headed.

In today’s post, we’re going to do just that by revisiting and analyzing some of our favorite breadth indicators and discussing what some of them are suggesting for commodities over the long run.

Let’s dig into it!

First, we need to understand that a breadth thrust isn’t a singular event. It’s a process that builds upon itself as a new bull cycle unfolds.

These thrusts in participation don’t all just happen overnight. Instead, they develop over shorter time frames at first and eventually culminate with a broad expansion in new longer-term highs.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

I was talking to the team earlier this week and mentioned that I was having a hard time writing. Grant and Ian were quick to remind me that it's probably because "nothing new is happening!"

They were right. Until now...

We finally got a major resolution in what we consider one of the most important charts in the world these days.

I'm talking about the US 10-year yield reclaiming that critical 1.40% level this week. And this begs the question as to what a rising rate environment might mean for investor portfolios.

Well, one thing we know for sure is we want to stay away from bonds... unless we're shorting them.

But how do we want to position ourselves in the stock market if yields are breaking out?

It's simple really. Some stocks do better with rising/higher rates, while others thrive in markets characterized by low growth and low yields. If this is the beginning of a fresh move higher for yields, then we want to be focused on buying the stocks that are likely to benefit the most.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

In recent weeks, the market has taken a risk-off tone as dollar-denominated risk assets have come under increasing pressure. 

Major US stock indexes have pulled back, and procyclical commodities such as crude oil and copper continue to chop around beneath overhead supply. 

Interestingly, we haven’t seen much of a bid in defensive assets through the recent bout of downside volatility. US treasuries have been relatively quiet, and the dollar remains below its August highs. Meanwhile, bond-proxy sectors like Utilities and Staples continue to make new relative lows. 

None of this suggests the kind of defensive positioning that would be typical in an environment where risk assets are getting hit. 

But what about one of the most significant safe-haven assets of all... the Yen?

Let’s take a look at how the Japanese Yen is setting up against other major currencies right now and what it could mean for the market at large.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Last night we held our September Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Risk assets have been getting hit for the past two weeks. Stocks have been under pressure, and commodities have been struggling.

Meanwhile, we never saw any real follow-through lower in the Dollar, as DXY has bounced right back to the upper bounds of its year-to-date range.

But, as usual, we continue to see pockets of strength in the commodities complex.

Last week, we wrote about the resilience from base metals, such as Steel, Nickel, and Aluminum.

More recently, we're seeing relative strength from the Energy complex. That's what we're going to talk about today...

Energy is actually the only sector that's positive over the trailing two weeks. And Energy futures haven't been looking too shabby, either.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

The US Dollar has been trapped in a sideways trading range for the trailing 12 months now. The primary trend is lower, and we continue to see near-term weakness from the DXY Index as well as most USD crosses.

Commodity-centric currencies have been some of the best performers versus the Dollar since early last year, although most of them have been correcting since Q1 or Q2, giving back a good deal of their earlier gains.

So, will we see a resurgence back to those risk-on pairs, or will they keep sliding lower against the Dollar?

Today, we’re going to focus specifically on the currencies of some of the largest oil-producing countries in the world.

This should give us information not just about currency markets, but also commodities and risk assets in general. 

Let’s talk about it.

An easy way to aggregate and measure their performance as a group is by analyzing our Petrocurrency Index. It includes currencies like the Canadian Dollar $CAD, the Russian Ruble $RUB, and the Brazilian Real $BRL, among others.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Industrial metals have been one of the strongest subgroups within the commodity complex over the trailing year. 

The parabolic advance in Steel futures off last year’s lows is an excellent illustration of this.

But lately, we see more and more commodities shift toward sideways trends in the intermediate-term. And lots of them are doing so trapped beneath overhead supply. 

A quick glance at charts like crude oil or copper tells this story well -- the last four months have been a chop fest for most.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Thanks to everyone who participated in last week’s Mystery Chart.

We questioned whether this consolidation would resolve in the direction of the primary downtrend--in which case we would expect a break lower.

Or maybe buyers would step in and defend those former lows once again.

Despite the lack of bearish momentum readings, many of you wanted to sell on a break below support, citing the primary trend as a major deciding factor.

And that's basically where our heads were, too, as it's always easier to go with the trend.

So what are we selling? Or should I say... buying?

The chart was the Small-Cap Technology ETF $PSCT… but it was inverted!

So those who wanted to sell on a breakdown were actually buyers, and vice versa.

Here’s a fresh look at the chart, right side up this time:

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

We held our September Monthly Strategy Session last night. Premium Members can access and rewatch it here.

Non-members can get a quick recap of the call simply by reading this post each month. 

By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.

With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

In last week’s Currency Report, we highlighted the NZD/USD cross as a means to express our bearish US dollar thesis.

The setup was too good to resist taking a swing at following the recently failed breakdown. And so far, we’ve been rewarded for it. That’s information.

But it’s not the only cross that continues to trend well against the US Dollar. We see it all over, and it’s only reinforcing our bearish thesis.

As such, we want to look for more opportunities to take advantage of this developing theme.

In this week’s post, we’re going to do just that.

Let’s drill into our forex universe now and identify some of our favorite risk/reward setups we want to bet on to capture profits from a weakening US dollar. 

From the desk of Steve Strazza @sstrazza and Ian Culley @ianculley

In last week’s Commodity Report we highlighted the Uranium ETF $URA and promised to dig up some trade ideas within this outperforming group of stocks.

While everyone was enjoying the Labor Day weekend, barbecuing, and watching football - we were pouring over our Uranium universe to uncover the best risk/reward opportunities in the strongest names. 

But hey, this is what we love to do!

So let’s dive right in and see what we found.

First of all, why do we like Uranium so much right now?

Both the Uranium ETF and the underlying commodity are showing leadership and breaking out of 6-year bases. That's more than good enough for us.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

In today’s Commodity Report, we zoomed out to our monthly charts to reconnect with the primary trend. This exercise really allows us to tune out the noise on the weekly and daily charts.

As we were reviewing our charts, there was one recurring theme that kept popping up...

Pullbacks and retests.

The CRB Index retested its breakout zone near the 2018 highs ~206. 

Crude oil broke back below a 13-year downtrend line only to reclaim it in recent sessions. 

Iron ore fell right back to check in on its 2013 highs. 

And even palladium, the one bright spot in the precious metals space, pulled back to a six-year trendline. 

But guess what? Just like we’ve recently seen in many of the weakest areas in other asset classes, buyers dug in at these key levels.  

Of all these retests, one that stood out most was Uranium. 

Let’s take a look.